Will IMAX Corporation (IMAX) Earnings Surprise this Season?

IMAX Corporation IMAX, a leading global entertainment technology company, is scheduled to report its second-quarter 2014 financial numbers on July 24, before the opening bell.

In the previous quarter, IMAX put up a disappointing show with its earnings lagging the Zacks Consensus Estimate by 50.0%. Let's see how things are shaping up for this announcement.

Factors at Play this Quarter           

IMAX Corporation registered the highest opening weekend box-office collection from the Warner Bros. Pictures' release – Godzilla. The success of Godzilla at the box office should drive the company's revenues higher in the coming quarter.

Furthermore, in Apr 2014, IMAX sold a 20% stake in IMAX China to strategic Chinese investors. Disinvestment of part of its Chinese operations will help IMAX expand its theater network in China and sustain the performance of IMAX's Hollywood and local Chinese titles. Additionally, IMAX announced a content delivery agreement with Wasu Digital TV Media Group as part of the IMAX TCL home theatre initiative.  

However, despite a strong backlog of 431 theaters, IMAX has given a tepid installation guidance of around 112 systems in 2014. The outlook is disappointing despite continued theater signings, a substantial backlog, and the underpenetrated nature of many international markets, including China, Brazil, Russia, and Europe.

Moreover, IMAX's business model is gradually shifting from equipment to box-office releases. As a result, the company is becoming increasingly dependent on the success of Hollywood films. The company's future performance thus depends on the selection of movies the company makes and their subsequent performance in IMAX theaters.

Earnings Whispers?

Our proven model does not conclusively show that IMAX Corporation is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zero Zacks ESP: The Earnings ESP for IMAX is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are poised at 19 cents.

Zacks Rank: IMAX carries a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revision momentum.

Other Stocks to Consider

Here are some other companies in the Business Software & Services industry for investors to consider, that, according to our model have the right combination of elements to post an earnings beat this quarter:  

Digital Cinema Destinations Corp. DCIN, with earnings ESP of +66.67% and a Zacks Rank #3.

Time Warner Inc. TWX, with earnings ESP of +1.19% and a Zacks Rank #3.

Shaw Communications, Inc. SJR, with earnings ESP of +3.03% and a Zacks Rank #2.

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