AMC Entertainment stock surges on Q2 earnings beat

AMC Entertainment (NYSE: AMC) stock surged above 5% in the pre-market trading after the movie chain reported better-than-expected results. The share price has recovered about 38% from the 52-week low level of $8.7 mark touched in July. However, due to tough macros, AMC’s shares have lost about 34% in the last 12 months.

Revenue rose 4.4% to $1.5 billion aided by improved attendance, higher food and beverage sales and online ticketing fees. Earnings per share came in flat at 17 cents over last year. Analysts were anticipating top line of $1.46 billion and EPS of 16 cents per share.

Operating cash flow rose 15.6% to $152.2 million while adjusted free cash flow improved 35.5% to $100.1 million backed by improved operating cash flow and reduced capital expenditures.

Key Metrics Performance

Attendance in the quarter improved 6.3% with US growing at 3.1% and International surging 16.6%. However, average ticket price was down 6% due to decrease in prices from both the US and international markets.

US ticket prices witnessed a decline of 4.8% due to the Stubs A-List subscription program and promotions. International markets ticket prices were down 8.8% due to currency fluctuations offset by increase in attendance.

F&B revenue per customer rose 4% with US markets witnessing an increase of 5.5% while international F&B revenues inched up 2.5%. Average screen count at the end of Q2 period reduced marginally to 10,675 compared to 10,684 in the prior year period.

CapEx Plans

For the 2019 fiscal period, AMC now expects capital spending to be about $415 million, down $35 million from the prior guidance. The company has further scaled down the spending for the fiscal 2020 period. It expects to spend about $300 million during the next fiscal, a decrease of 28% from the fiscal 2019 period.

As part of the profit improvement plan, AMC plans to save nearly $50 million by fiscal 2020, out of which $5 million would be realized in the 2019 period.

Stubs A-List Program 

AMC launched the Stubs A-List subscription program to its patrons in June 2018, which has been well received by the customers exceeding the firm’s estimates. The company is seeing healthy growth in the subscriber count despite the fee hike announced last quarter.

The subscriber count has eclipsed 900,000 members, an increase of 15% from the first quarter. With steady rise of subscribers to the A-List program and improved attendance, AMC would benefit from increased F&B and other revenues in the near future.

The program would help the movie chain to bring in sustainable revenues offsetting seasonality impacts. More importantly, A-List program is profitable in the first half of 2019, which is a good sign for investors.

Promising Outlook

For the current fiscal year, AMC expects revenue growth to be in the range of 3-5% which is ahead of 1% revenue growth anticipated by the street. Analysts are projecting revenue of $5.5 billion and loss of 69 cents per share.

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