'Beauty And The Beast' Drives Regal Comps Boost

“The live action re-imagining of animated classic Beauty and the Beast [Walt Disney Co (NYSE: DIS)] opened at a March record $170 million, actually the seventh largest U.S. opening all-time and the best for a PG-rated film,” Wunderlich’s Matthew Harrigan said in a note.

The analyst maintains a Buy rating on Regal Entertainment Group (NYSE: RGC), with a price target of $31.

Comp Boost

Harrigan believes that the concern regarding the timing of the release was overdone, with Regal Entertainment’s CEO, Amy Miles, that “there is (professed) consensus on avoiding cannibalization for both studios and exhibitors.”

Box office has now risen 5.8 percent year to date, despite the toughest 2017 comparisons. Accordingly, the first-quarter estimates for the company have been meaningfully revised.

Estimates Revised

“We now look for RGC's sales to be up 3.2 percent to $812 million, compared to Bloomberg consensus of $751 million and a prior Wunderlich estimate of down 5.5 percent to $744 million,” the analyst mentioned.

The adjusted EBITDA estimated has been raised to $163 million, from the earlier estimate of a 17.3 percent decline to $136 million.

The adjusted EPS estimate has been raised from $0.20 to $0.29, ahead of the consensus expectations.

Looking Ahead

“We note that global box office is now over 50 percent of studio movie sales with the decline in packaged media, and box office offers unique monetization by pair of eyeballs count and critical social and marketing excitement,” Harrigan went on to say.

The analyst expects the upcoming CinemaCon to prove more perspective on the robust film slate through 2020.

Harrigan noted that Regal Entertainment had 12 million active members in its Regal loyalty program, with $1.1 billion in associated revenues in 2016.

In addition, the analyst expects the company’s penetration to reach 40–45 percent by the end of 2019, although the specific timing would depend on landlord contribution negotiations.

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