ATML Earnings Action

In the midst of what could be a prolonged recession, investors are lining up at the exits to rid consumer discretionary stocks from their portfolios, but Cinemark Holdings Inc. (CNK), a movie theatre operator, is a stock that the market place might be too overly pessimistic about in light of its rich dividend yield and earnings resiliency as moviegoers still lineup at the box office in decent numbers. In November, the company reported third quarter net income of $20.4 million, or $.19 a share, on revenue that increased 1% $471.5 million thanks to a 4.5% increase in average ticket prices and a 5.4% increase in concession revenues per patron. Analyst expectations called for EPS of $.17 on revenue of $460 million. And on the conference call, management expressed optimism about the fourth quarter and end of year with a solid film slate and October box office sales that were up 17% year over year. The company also declared its quarterly dividend of $.18 per share - $.72 on an annualized basis or a current yield greater than 10%. Not too shabby. Of course, the one thing to keep an eye on is Cinemark’s debt load which is why the stock has failed to gain any traction. Standard & Poor’s did voice concerns about that earlier this month in a report on Dec. 15, highlighting its debt of $1.54 billion while keeping Cinemark’s credit rating the same. But it’s worth noting that debt doesn’t mature until 2013 and 2014 and that Cinemark has $371.3 million in cash, can draw on a credit facility of $121.5 million if need be to address any immediate liquidity concerns, and continues to generate good cash flow – EBITDA for the last three months was $102.1 million. Trading at $6.97, the market seems to be pricing in everything from deteriorating earnings to a dividend cut or worse, but that might turn out to be an overly bearish view especially if Cinemark continues to maintain its operating performance in this recessionary environment.