Why National CineMedia (NCMI) Is Falling Today

NEW YORK (TheStreet) -- Digital movie theater network National CineMedia  (NCMI) was falling 11.51% to $15.92 on Friday afternoon after the company issued guidance that came up short of analysts' expectations.

For the first quarter of the fiscal year 2014, the company expects revenue of $67 million to $72 million, which was less than analysts' estimates of $79.5 million. For the full year, National CineMedia expects revenue of $430 million to $440 million, while analysts anticipate $462.93 million.

The company did beat expectations on adjusted earnings for the fourth quarter, which totaled $12.7 million, or 21 cents per share. Analysts polled by Thomson Reuters expected 16 cents per share for the quarter. Profit was $19 million, or 32 cents per share, up from a loss of $500,000, or one cent per share, in the same period one year earlier.

Revenue increased 5.9% year over year to $122.7 million from $115.9 million. Analysts expected revenue of $117.58 million.

Stifel Nicolaus also downgraded National CineMedia to "hold" from "buy."

Must ReadRSI Alert: National CineMedia (NCMI) Now Oversold

TheStreet Ratings team rates NATIONAL CINEMEDIA INC as a "buy" with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate NATIONAL CINEMEDIA INC (NCMI) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has significantly increased by 87.66% to $70.00 million when compared to the same quarter last year. In addition, NATIONAL CINEMEDIA INC has also vastly surpassed the industry average cash flow growth rate of -13.15%.
  • The gross profit margin for NATIONAL CINEMEDIA INC is currently very high, coming in at 72.54%. Regardless of NCMI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NCMI's net profit margin of 10.14% compares favorably to the industry average.
  • NATIONAL CINEMEDIA INC's earnings per share declined by 20.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, NATIONAL CINEMEDIA INC reported lower earnings of $0.24 versus $0.57 in the prior year. This year, the market expects an improvement in earnings ($0.56 versus $0.24).
  • NCMI, with its decline in revenue, underperformed when compared the industry average of 4.8%. Since the same quarter one year prior, revenues slightly dropped by 6.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: NCMI Ratings Report

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