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IMAX Down 16.5% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Imax Corporation (IMAX - Free Report) . Shares have lost about 16.5% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Second Quarter Earnings

IMAX reported earnings of 15 cents per share, missing the Zacks Consensus Estimate by a penny. Earnings also declined on a year-over-year basis.

Total revenue in the second quarter of 2017 was $87.8 million, down 4.34% year over year. The figure also missed the Zacks Consensus Estimate of $91.8 million. Adjusted EBITDA margin in the reported quarter was 37.9%. The company’s top line was hurt by below-par performance by some films in the second quarter.

Category-wise, Equipment and product revenues were $21.3 million, down 19.46%. Services revenues totaled $44.6 million, up 7.77%. Rentals revenues totaled $19.4 million, down 6.33%, while Finance income revenues were $2.4 million, up marginally.

Segmental Results

IMAX Corp. Theater Business generated revenues of $32.7 million, down 15.76% year over year. Within this segment, IMAX system sales and sales-type leases were $16.1 million, down 13.86%. Ongoing fees and finance income was $2.6 million, down 13.76%. Joint revenue sharing arrangements-fixed fees was $1.4 million, down 67.69%. Theatre system maintenance was $10.9 million, up 10.00%, while Other Theatre revenues fell 40.53% to $1.7 million.

Network Business generated revenues of $47.4 million, down 1.41% year over year. Within this segment, IMAX DMR was $27.7 million, up 1.25%. Joint revenue sharing arrangements-contingent rent was $18.9 million, reflecting a decline of 3.09% and IMAX systems-contingent rent deteriorated 34.76% to $0.8 million.

Other segments generated revenues of $6.2 million, up 34.28% year over year. Within this segment, Film distribution and post-production soared a massive 96.26% year over year to $5.1 million and Other revenues plunged 43.46% to $1.2 million.

Liquidity & Share Buyback

IMAX repurchased $46 million shares in the second quarter, thereby exhausting the previously announced $200 million buyback program. The company exited the second quarter with cash and cash equivalents of $158.2 million, compared with $204.7 million at the end of 2016.

Network Growth Statistics

The company installed 34 (including 1 upgrade) in the reported quarter compared with 40 (including 2 upgrades) in the second quarter of 2016. It signed 95 theatre agreements in the second quarter of 2017, flat on a year-over-year basis. As of Jun 30, 2017, the total theater count in backlog was 580, compared with 498 at the end of 2016. Total theatre installations as of Jun 30, 2017 are 1,257 compared with 1,215 at the end of 2016.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been two downward revisions for the current quarter.

Imax Corporation Price and Consensus

VGM Scores

At this time, Imax's stock has a great Growth Score of A, though it is lagging a lot on the momentum front with an F. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is solely suitable for growth investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We expect below average returns from the stock in the next few months.




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