Exhibition Stocks In Wall Street’s Spotlight After Regal Forecast

It’s too early to say whether Wall Street has rekindled its love affair with movie theater chains. But Regal Entertainment’s surprisingly strong Q3 report last night — and upbeat forecast for 2016 — boosted the entire sector today.

With the benchmark Standard & Poors 500 up less than 1% in mid-day trading, Regal’s shares rose nearly 6% with AMC Entertainment up as much as 6.1%, Carmike hitting +4.4%, and Cinemark up 3.5%. (The market dropped in early afternoon trading after the U.S. Federal Reserve hinted that it might raise interest rates in December.)

The exhibition upturn was notable because investors retreated from the stocks beginning around April. They looked past the collection of expected blockbusters in 2015 — including Star Wars: The Force Awakens — and projected lower consumer spending in 2016. Over the last six months Regal’s off 12.2%, AMC’s -16.5%, Carmike’s -23.9%, and Cinemark’s -19.2%.

But last night, in the first Q3 report by a major exhibitor, Regal CEO Amy Miles said that she feels “very confident about the film slate” for 2016 and 2017. On top of that, the No. 1 chain reported robust ticket sales at venues upgraded with recliner seats, and stronger than expected concession sales. Ticket buyers spent an average of $4.20 per person on food and beverages, up nearly 10% or 37 cents vs same period last year.

“Beyond menu introduction and alcohol, there was benefit from strategic price increases and improvements in popcorn and beverage volume off a kid-friendly slate that included Minions and Inside Out,” Wunderlich Securities’ Matthew Harrigan says. “Another nine cents of the Q3 concession gain was off volume on Coca-Cola and popcorn, while another nineteen cents was off pricing on the mainstay menu items.”

The encouraging report about upcoming films and impressive returns from exhibitor initiatives “should significantly lessen any lingering investor concerns that drove the group to trough valuations in late September,” says B. Riley analyst Eric Wold.

Benchmark Co’s Mike Hickey also says that the strong report about concession sales and profits “could provide a positive indication for future performance reporting from AMC, Cinemark and Carmike.”