How disappointing has Q4 been for movie exhibition chains? Even Star Wars: The Force Awakens probably can’t raise the quarter’s domestic box office revenues to the 11% gain over last year that Wall Street analysts anticipated, RBC Capital Markets’ Leo Kulp figures.
The “weak performance of the box office so far in 4Q15 will result in downward revisions for the exhibitors,” the analyst says.
Investors are already on to this: Over the last month Regal shares are down 8.6% with AMC -13.6%, Carmike -7.6%, and Cinemark -10.8%. In the same period the benchmark Standard & Poor’s 500 is down just 2.3%.
While it’s difficult to accurately forecast how movies will perform at the box office, it’s something that exhibition industry analysts must do: Their investor clients need to know whether theater chains are fairly valued, which requires them to estimate their earnings prospects.
But analysts were way too bullish about Q4.
To meet the consensus estimate for an 11% box office gain in Q4, all releases over the next three weeks need to generate nearly $1.2 billion, Kulp figures. That would be 48% more than domestic theaters saw in the same period last year.
Kulp estimates that releases other than Star Wars likely will contribute about $400 million in the last three weeks of the quarter.
That means Disney’s long-awaited sequel would have to generate more than $780 million in box office sales in its first 13 days.
That’s a stretch. Jurassic World set an opening weekend box office record, but fell short of the target for Star Wars by reaching $437 million in its first 13 days. Adjusting for inflation, Star Wars Episode 1 sales came to $340 million over the same time frame while Avatar reached $295 million.
If Star Wars beats everyone with $500 million, then it would mean the Q4 box office would be up just 1%. If it makes $400 million then theater sales will be down 3%.
The problem, Kulp says, is that so many films fell short of his and other analysts’ expectations. For example, he had to reduce his forecast for Spectre‘s contribution in the quarter by 21.8% to $205 million. He also was too optimistic about Hunger Games: Mockingjay -Part 2 (he now pegs at $300 million in the quarter, down 22.9% from his pre-release prediction), Good Dinosaur ($111 million, -35.8%), Steve Jobs ($18 million, -73.5%), and The Night Before ($40 million, -63%).
Films beating his expectations include Peanuts Movie ($135 million, +31.1%), Martian ($221 million, +27%), and Creed ($94 million, +70.9%).