Analyst Cuts Fourth-Quarter U.S. Box Office Forecast After 'Disappointing' Thanksgiving

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MKM Partners' Eric Handler now expects 4 percent instead of 15 percent growth, but maintains "buy" ratings on exhibitors Regal Entertainment and Cinemark.

NEW YORK - Following what he called a "disappointing" Thanksgiving five-day weekend haul, MKM Partners analyst Eric Handler on Monday lowered his fourth-quarter U.S. box office growth forecast and financial estimates for exhibitors Regal Entertainment Group and Cinemark.

But he kept his "buy" ratings on both stocks with a $15 price target on Regal and $26 on Cinemark.

"While we still look for the box office to strengthen in December, especially the last two weeks of the year, which typically account for nearly 25 percent of the quarter’s revenue, it no longer appears our 15 percent growth outlook (or consensus of low-double-digit growth) is achievable," Handler wrote. "As a result, we now forecast a more modest 4 percent growth for the fourth-quarter box office."

Fourth-quarter to-date, U.S. box office revenue is down 4.8 percent based on Cinemark’s fiscal calendar.

Despite this, he said "we remain positive toward both names as we believe the industry remains on track for its third consecutive quarter of growth and that this trend should continue for at least the first half of 2012."

The analyst also called Regal and Cinemark "solid defensive investments given their strong dividend yields of 6.2 percent and 4.5 percent, respectively, and the box office’s history of outperformance in weak economic environments."
Both stocks were slightly higher in mid-day trading Monday.


Twitter: @georgszalai