AMC Entertainment Holdings (NYSE:AMC) shares added more than 7% after the cinema chain released better-than-expected preliminary financial results for the second quarter.
The company pre-announced Q2 revenue of $1.03 billion, in line with Street estimates and a loss per share of $0.10, ahead of the consensus of a loss per share of $0.48.
CEO Adam Aron attributed the weakness in the company’s Q2 results when compared to the year-ago quarter to the prolonged actors and writers strikes of 2023 but noted that moviegoing appears to be on an upward trajectory.
“AMC enjoyed a significant increase in our daily revenues in June of 2024 as compared to those of April and May of 2024,” Aron said.
“AMC continues to be confident that industry-wide movie revenues for the second half of 2024, and into 2025 and 2026 will continue to show increasing strength. This in turn suggests that AMC should enjoy increasing adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), if as and when overall industry revenues are climbing.”
Analysts at Wedbush welcomed the pre-announcement as “positive” as AMC goes into a tough quarterly print.
“North American box office ended down 27% year-over-year on a tough comparison and as last year’s Hollywood labor strikes reduced the volume of titles out this year. That said, we expect the summer box office to rebound notably from the year’s first half, albeit against difficult comparisons until September,” the analysts wrote in a note to clients.
“Q4 2024 comparisons ease significantly, and momentum grows with a solid slate and robust release volume in 2025.”
Three items the analysts are eyeing from AMC’s Q2 earnings report are if market share gains or other initiatives drove upside, if share gains are sustainable, and what combination of cash, share issuance and debt extensions will resolve the company’s remaining debt balances due before 2026.
They believe AMC can further expand its market share from 22.5% in 2023 with its extensive network of premium large format screens and concert movie distribution and drive revenue growth in Europe with theatre upgrades.
However, the cinema chain is unlikely to achieve this until it works through its balance sheet right-sizing.
“The company’s heavy debt load and lack of dividend overshadow these positive factors, but AMC is focused on alleviating its debt,” they noted.
“Since the beginning of 2022, AMC has reduced its debt by $1 billion but still has $4 billion remaining net debt. On July 22, AMC announced a significant move to extend its debt maturities but we expect EBITDA to still fall below 2024 interest expense. EBITDA should rise in 2025 and beyond, however.”
AMC’s shares are expected to remain volatile, the analysts added, noting that they are trading at a slight premium to its pre-meme historical multiple and above its competitors.
They repeated their ‘Neutral’ rating and $4 price target on the stock, which had gained 7.8% at $5.05 late morning on Thursday.
AMC will hand down its full Q2 earnings report after the stock market closes on Friday, August 2.