IMAX's Accelerated Screen Growth Should Drive Solid Long-Term Earnings Growth

Wedbush reiterated its Outperform rating on shares of IMAX Corporation (USA) IMAX. Given the company's accelerated screen growth and its ability to drive long-term earnings growth, the firm said it believes the company is well positioned to grow earnings and revenue in 2017 and beyond.

Analyst Michael Pachtar expects IMAX to expand its footprint throughout Europe and work towards obtaining exclusive release windows, helping it to capture a disproportionately large percentage of box office revenues. The analyst also sees the company benefiting from the expansion in the roll out of new laser projectors.

Additionally, the growth in the film slate in international markets with local language films in China, Japan, Korean and India and new content offerings, including virtual reality and TV pilots would help, the firm noted.

Related Link: The Street Isn't Seeing The Big Picture For IMAX

Wedbush expects third quarter domestic box office at IMAX to be up 16 percent year-over-year on higher screen count. However, this growth, according to the firm, was offset by the declines in Chinese subsidies even as the number of Chinese films proliferated.

Accordingly, the firm estimates international box office numbers to decline 31 percent year-over-year, bringing the overall box office numbers to $193 million, down 16 percent. Wedbush expects EPS to come in below its $0.13 estimate, but close to the consensus $0.09 estimate, due to margin compression.

Wedbush maintains its 2016 estimates of $375 million in revenues, $126 million in adjusted EBITDA and $0.87 per share in earnings. The firm also maintained its 2017 revenue estimate of $427 million, EBITDA estimate of $163 million and earnings per share estimate of $1.21.

The company is due to report its third quarter results on Thursday, October 20. Wedbush maintained its Outperform rating and $41.50 price target on shares of IMAX.