Regal Cinemas Makes a Good Showing

Last night, Regal Cinemas (RGC) reported better-than-expected earnings of $0.03 per share, vs. the Street consensus for $0.02. I continue to see a favorable reward-to-risk profile in the shares, given the improving slate of movies in 2012 that should spur admission revenue in the coming quarters while management continues to focus on costs and manage its concession revenue. Although the shares have climbed 10% since my Dec. 29, 2011, recommendation, there remains ample upside to $18 in the coming quarters. 

Revenue was down from a year ago, because of a combination of a weak fourth-quarter 2011 box office and fewer theaters and total screens for the company. But the better-than-expected bottom-line results reflected a revenue mix that favored higher-margin concession revenue and reduced costs for film rental and advertising. While those costs dropped in absolute dollars, some quick analysis reveals that they also declined faster than the overall decline in revenue year over year in the quarter. This shows that Regal's management is making progress on reducing its variable cost structure....388 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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