Analyst: Price War Truce Helps National CineMedia Inc.

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Price wars hurting the cinema advertising company National CineMedia Inc.
NCMI
appear to have subsided and the company is on track for robust 2015 growth, according to an analyst. FBR's Barton Crockett upgraded the company to Outperform with a $17.50 target and said theater advertising prices are on firmer ground following last year's 16 percent drop. The lower cost is "opening up new levels of advertiser interest," according to Crockett, who said National CineMedia may offer a 23 percent total return including dividends. The company's prime competitor, Screenvision, "is seeing this lift too, limiting their incentive to return to destructive price cutting," Crockett said. National agreed in March to pay $26.84 million to terminate its merger agreement with Screenvision after antitrust regulators challenged the deal. Last year's price war might have been in part motivated by Screenvision's desire to pressure National into making a bid, according to Crockett. Moreover, theater advertising may be becoming more appealing as a way of reaching younger audiences who are becoming increasingly scarce among the traditional television audience, Crockett said. National's shares are up about 9 percent since posting first-quarter results last week. With about 85 percent of this year's national advertising budget already booked, "our confidence is growing" in the company's outlook, MKM's Eric Handler said. But repeated volatility in the company's performance over the past eight years leaves Handler looking for additional evidence of sustained growth. Handler maintained a Neutral rating and $15 target on National but nudged his 2015 revenue forecast up 2.6 percent to $120 million. Stifel's Benjamin Mogil boosted his price target nearly 6 percent to $18, maintaining a Buy rating. The company's second-quarter outlook was higher than expected and Mogil expects National will make an upward revision to its full-year guidance. National CineMedia is 75 percent owned in separate stakes held by Regal Entertainment Group
RGC
, Cinemark Holdings Inc.
CNK
and AMC Entertainment Holdings Inc.
AMC
.
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