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Plot Twist: AMC Entertainment's Messy Q3 Carries Positive Themes

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Plot Twist: AMC Entertainment's Messy Q3 Carries Positive Themes
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Shares of AMC Entertainment Holdings Inc (NYSE: AMC) hit a new 52-week low of $11.25 Tuesday morning, but quickly rebounded into positive territory. Some of Wall Street's top analysts were encouraged by the company's third-quarter earnings report and defended against a concerning guidance update.

AMC's third-quarter revenue, EBITDA, EPS and other metrics came in better than expected ,which helped boost the stock higher by more than 9 percent Monday afternoon. But an adjustment to its 2017 EBITDA guidance from a range of $860-$900 million to a new range of $810-$865 million erased the gains. 

The Street's consensus 2017 EBITDA estimate already stood at $850.1 million heading into the earnings report, which implies the guidance is in fact in-line with consensus estimates, Loop Capital Markets' David Miller said in a note. The company also discussed spinning off its European assets into a new public company that could "supercharge" the ongoing de-leveraging campaign.

AMC deserves some credit for its film rents — the remittance back to the studio system — which read 48.4 percent in the quarter, the analyst said. Not only was this a record for the company, but it was the lowest among all of the three major public movie theaters and highlights AMC's "much larger" size and accompanying buying power against the studios, Miller said. 

AMC's earnings report showed a major disconnect between what some analysts and investors "thought would happen" versus what has actually occurred. For example, the "the specter of a PVOD window throughout this year has affected all three of the theater names, but that hasn't happened," Miller said. A "pretty good chance" exists that 2017 will prove to be another record year for moviegoers, Miller said — also a thesis that isn't playing out as expected.

Miller maintains a Buy rating on AMC's stock with an unchanged $33 price target.

B. Riley: Proof Of Success

AMC's third-quarter earnings beat came at a time when box office performance was "relatively weak,"

which demonstrates the success the company is seeing in its theater remodel strategy and bodes well for 2018, B. Riley FBR's Eric World said in a note. 

AMC's stock continues to be "overly punished" by investors, but in fact the company is positioned to report stronger results in 2018, the analyst said. In fact, the stock isn't assigning the necessary value for recently acquired Odean and Nordic assets, and management may be able to fetch a higher valuation model for its European assets in a future IPO, World said. 

AMC's revised 2017 EBITDA to the downside is "somewhat disappointing" given the magnitude of the cut, World said, adding that this may be necessary after the company oversaw three transformative acquisitions and an increase to its international exposure.

AMC's stock has been "overly punished" throughout most of 2017 due to short-term swings in box office trends that ignors the company's "attractive" setup into 2018 and beyond, the analyst said. 

World maintains a Buy rating on AMC's stock with a price target lowered from $30.50 to $30.

Related Links:

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AMC Shares Slammed Amid Q2 Warning; Loop Cuts Target But Maintains Buy

Latest Ratings for AMC

DateFirmActionFromTo
Nov 2017Credit SuisseMaintainsUnderperform
Oct 2017B. RileyMaintainsBuy
Sep 2017Credit SuisseMaintainsUnderperform

View More Analyst Ratings for AMC
View the Latest Analyst Ratings

Posted-In: AMC Entertainment B Riley David Miller Eric World Loop Capital Markets movie theatersAnalyst Color Analyst Ratings Best of Benzinga

 

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