Carmike Cinemas Releases 2012 Q4 Earnings

Carmike Cinemas: Small-Cap Worth Buying

Carmike Cinemas: Small-Cap Worth Buying

Carmike Cinemas: Small-Cap Worth Buying

Movie theaters seem to be in the clear as far as rising ticket prices are concerned. This is surprising given that their suppliers (major media companies) are struggling to improve profitability. One of theater chain currently benefitting from booming box office sales is Carmike Cinemas (NASDAQ: CKEC). Often written off to the point of ridicule, Carmike Cinemas has encountered rough weather over the past decade or so but is now enjoying its best phase.

The company recently revealed earnings and they are nothing less than stellar. Moviegoers spent over $146.6 million at various Carmike Cinemas theaters. This represented almost 23 percent growth in revenue. At the same time, the cash flow for the company also improved by over 30 percent, closing out the quarter at $35.6 million. The major victory for Carmike Cinemas was in terms of box-office gains. The theater chain remained 220 basis points ahead of the competition.  

On the surface, it seems as though deciding whether or not to buy Carmike Cinemas’ stock is a no brainer. But, you have to factor in the reach of the theater chain before making a final decision. Compared to global movie theater chains like Cinemark Holdings, Inc. (NYSE: CNK) and Regal Entertainment Group (NYSE: RGC), Carmike is a small-scale operator. Carmike Cinemas is a regional theater chain which mostly operates in rural areas and towns with populations lower than 200,000. 

This is a major reason why most investors choose to stay clear of Carmike Cinemas stock. The company isn’t able to benefit from economies of scale because of its limited outreach. Still, Carmike Cinemas has over 2,500 screens up and running and is on target to cross 3,000 screens in the near future. With ticket prices and movie admissions on the rise, revenue for the theater chain is expected to continue growing for some time to come.

What is impressive about Carmike Cinemas is the fact that the company had to rally after having filed for bankruptcy back in 2001. The current management of the company has made some wonderful moves over the past couple of years which are responsible for its improved performance. Carmike Cinemas has an agreement with theater advertisers Screenvision under which they received a 20 percent stake as well as $30 million in cash up front. This has opened up new horizons for Carmike Cinemas to increase earnings. Moreover, as mentioned above, Carmike Cinemas is well on its way to increasing the number of screens it runs. In the last quarter of 2012 alone it added 267 screens to the existing number. Premium prices charged for 3D tickets have also resulted in increased box office revenue at theaters across the country. In a nutshell, the future looks bright for Carmike Cinemas and investor outlook will remain optimistic for the foreseeable future.

Coming to the main question, it is difficult to pass judgment on whether Carmike Cinemas is a stock worth buying. The company has continually outperformed larger competitors. Yet, at the same time its scope is somewhat limited by its status as a regional theater chain. However, its stock price is going to increase for the next few months so now is the best time to buy Carmike Cinemas’ stock.

Comments

Related News

7 Responses

Leave a Reply
  1. Lillie
    Apr 09, 2013 - 12:25 PM

    Looks good. Strong buy rating and scheduled to outperform over the next six months. Forward PE 15.87.

    Reply
  2. Tyokunbo Abiola
    Tyokunbo
    Apr 12, 2013 - 08:52 AM

    Good for a short-term play during a pullback. But its large debt turns me off a long-term commitment.

    Reply
  3. Brian Prescott
    Apr 14, 2013 - 03:51 AM

    Carmike looks interesting and primed for further growth. Growing wages across the industries will have more impact on people in small cities and towns than bigger cities in terms of boosting discretionary spendings.

    Reply
  4. Meiko Acebo
    meikoacebo
    Apr 14, 2013 - 02:03 PM

    Could be pricey despite fundamentals. I would rather pay for a single digit PE stock with lower earnings growth. However, this could be on someone’s watchlist and just wait for the pullback. how’s consumer spending doing btw?

    Reply
  5. Lennox Yieke
    lyieke
    Apr 15, 2013 - 05:39 AM

    It would be prudent to wait for the pullback, good short term incentive.

    Reply
  6. Lennox Yieke
    lyieke
    Apr 15, 2013 - 05:48 AM

    Considering that it is likely to outperform in the next half year, I believe that right now would be a good time to establish a position in the stock.

    Reply
  7. Khangelani Hlongwane
    konraad
    Apr 24, 2013 - 03:54 PM

    Future of this industry is very uncertain. Will be a bit hesitant

    Reply

Leave a Reply

Connect with:

Your email address will not be published. Required fields are marked *