Don’t expect blockbuster earnings from Regal Entertainment Group

In a few weeks’ time, the American Academy of Motion Picture Arts and Sciences will announce the nominations for this year’s “Oscar” awards – and Regal Entertainment Group (RGC) will announce its fourth-quarter earnings. The latter part of this double feature isn’t likely to win much applause, however, at least based on the signals identified by the StarMine research team at Refinitiv.

It has been a bleak year for companies like Regal Entertainment, whose fate is tied to box office returns, as this Reuters News article explains. The holiday season, running from Thanksgiving until the New Year, is traditionally the time that studios release potential blockbusters in hopes of winning Oscars and audiences, but the multiplex cinemas that Regal Entertainment operates as well as the theaters owned by its rivals seem less crowded than is usual at this time of year. Logically, that doesn’t bode well for Regal’s fourth-quarter results; indeed the company now has a large negative Predicted Surprise of -39%. All signs point to the company disappointing its investors when it reports earnings for the quarter on February 6, 2012.

The SmartEstimate for Regal Entertainment (represented by the blue line on the chart below) has fallen dramatically since the beginning of December to only 8 cents a share today, although the I/B/E/S consensus (represented by the gold line) has fallen much less and remains relatively high at 13 cents a share. The most recent estimates released by analysts have been lower, and the better analysts have estimates that are lower than the consensus figure; together, these explain the large difference between these two figures.

In yet another sign that analysts have become more bearish about box office sales this quarter, in the last month alone analysts have announced a total of eleven downward revisions to Regal Entertainment’s fourth-quarter earnings forecasts; none have revised their expectations higher. Among those trimming their forecasts is Chad Beynon of Macquarie Research, an analyst who has earned a four-star rating from StarMine for his historical accuracy, who lowered his estimate to 5 cents a share.

We recently discussed the weakness in the 3-D movie market, focusing the woes dogging IMAX in this article. The recent reports from analysts and others who study box office trends suggest that the industry’s struggles aren’t confined to 3-D movies but are more widespread. One worrying possibility is that the high unemployment rate is causing moviegoers to cut back on their cinema outings and turn to television instead; perhaps the consumer is not as confident as some recent retail sales data suggests. Movie studios plan to release a fresh crop of action films featuring superheroes in the New Year, which usually draw large crowds. It will be interesting to see if that magic works in 2012 as it has in prior years, or whether the earnings woes now dogging Regal Entertainment will continue to keep investors on the edge of their seats.

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