Viacom Analyst Cuts Film Profit Estimate by $30M, Citing 'Turtles 2' "Shortfall"

'Teenage Mutant Ninja Turtles: Out of the Shadows'

Michael Morris cites "the magnitude of the shortfall" and "the film’s importance to the company."

With Paramount Pictures' Teenage Mutant Ninja Turtles: Out of the Shadows winning a ho-hum U.S. box-office weekend with a weaker-than-expected $35.3 million and becoming the latest sequel to fall behind its predecessor, Wall Street analysts on Monday discussed its performance and how it will affect the financials of the studio and its parent company Viacom.

“While we rarely focus on single film titles as financial drivers across our coverage universe, we highlight [it] here given the magnitude of the shortfall (the film now appears on pace for about $100 million in total domestic gross) and the film’s importance to the company given a significantly smaller than peer average slate,” wrote Guggenheim Partners analyst Michael Morris. He lowered his fiscal third-quarter operating profit estimate for Viacom’s film unit by $30 million, after previously forecasting $48 million, "to reflect the TMNT performance."

With various sequels, including Alice Through the Looking Glass, disappointing at the box office this year, FBR & Co. analyst Barton Crockett entitled his Monday report "Sequels Sucking Wind."

He highlighted that the TNMT sequel's domestic opening performance "was $15.7 million below our projection" and close to half of the original's $65.6 million domestic debut in 2014.

"We now see TMNT2 with $120 million domestic box office, somewhat below the $150 million domestic in our Viacom model and well below the $191 million of TMNT1," Crockett wrote.

"But TMNT2 appears to be faring better internationally, with an international opening of $34 million from 40 countries this weekend that was within 8 percent of TMNT1 in comparable markets," he said in highlighting one positive trend. "This suggests that TMNT2 might be able to perform in line with or better than the $225 million international box office estimate in our Viacom model, as TMNT1 had international box office of $302 million."

MKM Partners analyst Eric Handler titled his latest weekly box-office report, “Box office lacking kick as weekend falls short of expectations.” In it, he explained: “The underperformance was primarily attributable to weaker-than-expected results from Teenage Mutant Ninja Turtles and X-Men: Apocalypse, partially offset by better-than-expected results from Me Before You. In total, nine of the top 10 films underperformed relative to our expectations.”

And B. Riley analyst Eric Wold said Monday that the "weakening" box-office trends add to his recently voiced concerns about exhibition stocks "with additional risk to second-quarter consensus estimates."

In a March research report, he had downgraded shares of AMC Entertainment, Regal Entertainment and Cinemark to "neutral" from "buy" citing "concerns that the 30 percent-plus year-to-date run-up in exhibitor shares put them at risk for a pullback" and "our belief consensus estimates were too high."