This week’s Stock of the Week is keeping people entertained—in new ways and in new markets.
Cinemark Holdings (CNK) operates more than 500 movie theaters with nearly 6,000 screens throughout the US and in many Latin American countries.
Moviegoing is considered a mature industry in the US, but it is growing quickly in Latin America thanks to a fast-emerging middle class there. And the company is now moving more toward including virtual reality (VR) and video games in US theater locations. Cinemark plans to roll out VR products in association with Disney and other content providers. For example, it launched a Star Wars-based virtual-reality experience in a theater in Plano, Texas in September.
Cinemark is also upgrading theaters in suburban locations to offer better seating, premium food and beverages and even alcohol in some locations. All this makes moviegoing a more desirable experience—and even as ticket prices rise, still an inexpensive experience compared with attending live concerts or sports events.
Cinemark earnings will dip slightly for 2018 because Hollywood had an unusually large number of high-grossing films in 2017—but 2019 looks like another very good year for filmmaking and therefore for theaters. Cinemark’s revenue continues rising. It was $2.99 billion in 2017 and will likely be $3.1 billion in 2018, then $3.3 billion in 2019. And thanks to strong cash flow, the dividend of $1.28/share/yr., recently yielding 3%, appears secure.
Fiscal year: December. Earnings per share: 2019 est./$2.30…2018 est./$2.01…2017/$2.26.
Eric Marshall is co-manager of the $600 million Hodges Small Cap Fund (HDPSX), Dallas. HodgesFunds.com