Expect A Noisy 2017 From AMC As Acquisitions Lead To Transformation

Wedbush’s Michael Pachter expects AMC Entertainment Holdings Inc AMC to see “a little noise” through 2017, since it will be a transition year as the company renovates theaters and completes and integrates acquisitions.

The analyst maintained an Outperform rating on the company, with a price target of $41.

Accretion From Acquisitions

Pachter expects EBITDA growth for 2017 at more than $300 million, half of which is expected from the integration of Carmike Cinemas, Inc. CKEC and the rest to be contributed by Odeon and robust box office growth, as well as synergies.

The Nordic acquisition is also expected to be accretive during the year.

EBITDA growth is expected again for AMC Entertainment again in 2018, “driven by theater upgrades, segmenting of theaters into upscale and mid-tier brands, further cost synergies and growth in average ticket price and concessions,” Pachter stated.

Related Link: Is Regal Entertainment The Most Likely Buyer For AMC's Divestitures?

Strong Q4

The company reported strong Q4 results, at or above the preannouncement and the expectations.

AMC Entertainment reported revenue of $926 million, ahead of the estimate and at the high end of the preannounced range, with adjusted EBITDA of $189 million, again ahead of the estimate as well as the preannounced range.

EPS for Q4 came in at $0.33, a penny short of the estimate and in line with the preannouncement.

However, admissions revenue per average screen decline 9.6 percent, as compared to the industry decline of 3.5 percent, “with the delta driven by a tough comparison, lower attendance, and lower average ticket at the Starplex and Carmike circuits,” the analyst explained.

“This quarter’s strong results in the face of a difficult box office comparison and average ticket headwinds from acquired circuits highlight the strength of AMC’s model, and the impact of upgraded seating, concessions, and a revamped loyalty program,” Pachter went on to say.