Regal, Cinemark: Movie Theater Winners

NEW YORK ( TheStreet) -- Regal Entertainment ( RGC) and Cinemark ( CNK) shares are climbing today after two analysts raised their ratings on the movie theater stocks and provided solid domestic and international industry forecasts.

Analyst David Miller with Caris upgraded Regal to an above average rating from average as he expects the domestic box office to see strong results in the second and third quarter.

"The studio system looks as strong, if not stronger, than 2009, a year the U.S. box office finished up 10% year-over-year," Miller said in a Jan. 18 note to investors.

Miller anticipates that the movie industry will see strong sales in the summer of 2011, on titles such as DreamWorks' ( DWA) Kung Fu Panda, Viacom's ( VIA) Transformers 3, Disney's ( DIS) Cars 2, Time Warner's ( TWX) The Hangover 2 and the final installment of the Harry Potter movie franchise.

Miller says Regal is the "No. 1 market share player domestically," as the company has "tremendous supplier power over the studio system with 6,723 screens." He predicts that the company will report total revenue of $3.01 billion in 2011, up from an estimated $2.83 billion in 2010. His earnings estimate for 2011 is 79 cents a share, up from his estimated 27 cents per share in 2010.

Cinemark shares are rising almost 2% after analyst David Gober of Morgan Stanley raised his rating on the stock to equal weight from underweight due to the company's expansion in Latin America.

"While we remain cautious on U.S. theatrical attendance trends, Cinemark's growth in Latin America continues to surprise to the upside with 15% to 20% organic revenue growth over the past few years," Gober said in a Jan. 18 research note.

Gober predicts that Cinemark's business in Latin America will represent almost 40% of earnings before interest, taxes, depreciation, and amortization by 2013, compared with less than 20% in 2009.

He said Cinemark will likely see larger growth than Regal, due to "strength in its international business as well as consistent performance of its domestic operations versus the industry average."

He increased his price target on Regal to $13 from his previously projected $12, and upped his price target on Cinemark to $20 from $17.

On Jan. 4, analyst Matthew Coppola of Williams Capital Research initiated coverage of Cinemark with an outperform recommendation and a 12-month target price of $21 based on his 2011 earnings estimate of $1.47 a share.

Coppola expects Cinemark to see "explosive international growth" after it introduced the multiplex theater to Latin America. Cinemark, which is the second largest exhibition operator in the world, currently operates theaters in 13 of the 15 major metropolitan areas in Latin America.

Its international theaters have seen a growth rate of 13.6% over the past 3 years. In 2010 the company built 2 theaters domestically and 5 theaters internationally, and it expects to add 17 new theaters with 170 screens by the end of 2011.

Regal shares are up more than 1.7% today to nearly $12.95 while Cinemark shares are rising almost 2% to around $18.15.

-- Written by Theresa McCabe in Boston.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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