KEY POINTS
- AMC is reporting fourth-quarter earnings on Tuesday, March 1, after the market closes.
- It released preliminary results on Feb. 1, but they don't tell the whole story.
Investors shouldn't expect many surprises when AMC Entertainment reports fourth-quarter results on Tuesday after the market closes. It already released preliminary results several weeks ago in a bid to generate some positive momentum for the stock after a steady drumbeat of gloom kept knocking its stock lower.
Since there wasn't much of a reason to preannounce earnings -- it says it did so in advance of possibly meeting with potential investors -- what small, retail investors should be concerned about is if there will be a nugget or two of bad news contained deep within the official disclosures.
As hopeful as many of AMC's faithful investors are about the movie theater operator still going from here straight to the moon, let's take a more realistic look at what to expect.
The curtain is still coming down
AMC is doing better on the revenue front, no doubt about it. The preliminary fourth-quarter report indicates the theater chain is looking at $1.17 billion in revenue, and it even said it will have adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of between $146.8 million and $151.8 million, operating cash of $215 million, and liquidity of $1.8 billion.
CEO Adam Aron says it represents "the strongest quarter in two years."
The problem is that that's as good as it gets. It reported net losses much worse than what Wall Street was expecting, and was only able to turn those GAAP losses into adjusted profits mostly by backing out impairments on assets while controlling for interest, depreciation, and amortization. Operationally, AMC is still an ailing company.
And even on the revenue front, it's not all that great. The boost to sales was primarily the result of the December release ofSpider-man: No Way Home, the massive blockbuster hit that has become one of the 10 best movie releases of all time. This year isn't shaping up to be much of a repeat.
A dreary lineup of entertainment
So far in 2022, total movie box office is $682 million, 30% of which is a carryover from Spider-man. The next biggest film,Scream, generated only about a third of that, or $77.7 million. That should get your Spidey senses tingling that theater operators are going to have a difficult time replicating their fourth-quarter success.
Hollywood also isn't putting out as many movies this year. Only 71 films are slated to debut in theaters in 2022 (thankfully, that includes anotherSpider-manmovie), but streaming services are still as much a viable threat now as they were during the lockdown phase of the pandemic.
You're still going to get straight-to-streaming like what Disney is opting to do with Pixar's Turning Red, sending it straight to Disney+, or using day-and-date releases -- simultaneously releasing into theaters and streaming -- like Comcast's Universal Pictures did withMarry Me. Streaming is only going to risk further erosion of attendance.
The drip, drip, drip of decline
That's part of the worry for AMC Entertainment. The industry is slowly losing attendance over time and has offset that with price increases, which only exacerbates the situation.
Reddit traders rallied to boost AMC's stock price during last year's trading frenzy, and keep it aloft despite the fundamentals of the theater operator arguing against it. They seem to continue hoping that exposing dark pools, naked shorting, and other nefarious plots used to depress shares will send the stock soaring again.
It's possible these practices may have an effect. But eventually, a stock is only as solid as its business, and the foundations under AMC are simply not solid enough to justify its current valuation. Ultimately, that's the risk investors need to watch for: That some item in its financials will cause the entire foundation to crumble.
It may not occur this quarter, but investors need to be wary of a movie theater stock treading on such thin ice.
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