Americans still love going to the movies - and are still willing to spend big bucks on popcorn and soda too. This is good news for movie theater companies like Cinemark Holdings, Inc. (CNK - Snapshot Report).
Cinemark recently reported strong third quarter earnings, driven by double-digit growth in ticket and concession sales. Estimates have been trending higher, too, pushing the stock to a Zacks #2 Rank (Buy).
People Still Spending at the Movies
Cinemark reported its third quarter results on November 5. Total revenue improved 12.8%, driven by a stellar 13.9% increase in admissions revenue. Overall attendance was up 9%.
Revenue from concessions was also strong, increasing 11.2%. Apparently people are still willing to pay ridicuously high prices for that buttery popcorn! And, yes, the companies make a killing off of it. The gross margin on concessions was a whopping 84.4% in the quarter for Cinemark.
Meanwhile, operating income increased 32.5% due to high operating leverage.
Earnings per share came in at $0.29, beating the Zacks Consensus Estimate by 2 cents. It was the company's 9th consecutive positive surprise. It was also a 53% increase over the same quarter in 2009.
Estimates for both 2010 and 2011 have been climbing off the strong quarter, as seen in the Price & Consensus chart:
The Zacks Consensus Estimate for 2010 is $1.22, representing an 8% increase over 2009 EPS. The 2011 estimate is currently $1.41, corresponding to 15% annual growth.
In its third quarter press release, Cinemark announced a 17% dividend increase - its first hike since 2007.
The stock currently yields an attractive 3.9%.
Shares appear to be reasonably priced, trading at 15x forward earnings. This is a significant discount to the industry average of 22.2x.
Its price to sales ratio of 1.0 is also below the peer group average at 1.1.
Cinemark Holdings is based in Plano, Texas and has a market cap of $2.1 billion. It operates over 400 theaters throughout the U.S., Mexico, and Central and South America.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.