What happened
Shares in the cinema chain Cinemark stocks (CNK -14.37%) is down 14.3% as of 2:11pm ET today.
Shares were lower after last night’s earnings report, despite the company beating sales expectations. This may have something to do with management’s comment that the current quarter could be more challenging due to the cushion of new releases in August and September.
so what
Cinemark actually had a relatively strong second quarter, with revenue rising 152.6% to $744.1 million, beating analyst estimates as the cinema chain made a strong recovery from the pandemic. Management also noted that the company had outperformed the industry by 3 percentage points internationally and 4 percentage points in recovery.
The bottom line fell short of analysts’ expectations as the company reported a loss of $0.61 per share. However, this largely resulted in a non-cash impairment charge of $92.3 million. Excluding this charge, second quarter operating loss would have turned from $18.6 million to $73.7 million in operating profit.
But like so many earnings releases, the stock’s reaction wasn’t based on past numbers, but rather on forecasts. Speaking about the earnings release, CEO Sean Gamble said August and September will be more difficult as there were fewer major releases ahead of the busy fall and holiday season. The last quarter benefited from several high-quality blockbusters such as Top Gun: MaverickWith no such blockbusters in sight for late summer, investors are concerned about the recovery of the fragile industry.
what now
Cinemark trades with a market cap of $2 billion and an enterprise value of approximately $3.8 billion. In fiscal 2019 before the pandemic, the company had net income of about $191 million, but those earnings numbers didn’t grow.
Although scammers haven’t fully recovered yet, investors seem to be expecting most things to be “back to normal.” As we have seen, the post-pandemic economy is still vulnerable to inflationary shocks, new COVID-19 variants and monkeypox, among others. Oh, and the danger of streaming still lurks in the theater industry, just as it did before the pandemic.
So it seems that investors are right to be cautious these days as the harsh reality meets expectations of a full theater recovery.
Billy Duberstein has no position in any of the stocks mentioned. Your customers can own the shares of the mentioned companies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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