5 Movie and Entertainment Companies to Buy for Summer Blockbuster Season

NEW YORK (TheStreet) -- The Memorial Day weekend kicks off a crucial time for movie and entertainment companies -- the summer blockbuster movie season.

Gross domestic box office receipts are up 4.5% to $3.94 billion this year as of May 20, compared to a year ago, according to Rentrak. But the summer season is an important period for big movie distributors including Time Warner's (TWX) Warner Bros., Paramount Group's (PGRE) Paramount Pictures, 21st Century Fox (FOXA) and Comcast's (CMCSA) Universal Pictures.

Some of the most anticipated movies to be released this summer include: Warner Bros. San Andreas, Entourage and Magic Mike XXL; Paramount's Terminator: Genisys; Fox's Fantastic Four and Universal's Jurassic World and Minions, among others.

Obviously the success or failure of the films could have reverberations on the stocks of these companies. Here are five movie and entertainment companies that are buy-rated according to TheStreet Ratings. And when you're done be sure to check out airline stocks to buy.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Note: Year-to-date returns are based on May 21, 2015 closing prices.

CNK Chart CNK data by YCharts

1. Cinemark Holdings Inc. (CNK)
Market Cap: $4.8 billion
Year-to-date return: 17.2%
Rating: Buy, B+

Cinemark Holdings, Inc., together with its subsidiaries, engages in the motion picture exhibition business. The company operates theatres in the United States, Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, and Bolivia.

TheStreet said: "We rate CINEMARK HOLDINGS INC (CNK) a BUY. This is driven by a few notable 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 revenue growth, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

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

  • CNK's revenue growth has slightly outpaced the industry average of 4.2%. Since the same quarter one year prior, revenues slightly increased by 7.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CINEMARK HOLDINGS INC has improved earnings per share by 19.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CINEMARK HOLDINGS INC increased its bottom line by earning $1.67 versus $1.28 in the prior year. This year, the market expects an improvement in earnings ($2.14 versus $1.67).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Media industry average. The net income increased by 20.0% when compared to the same quarter one year prior, going from $35.44 million to $42.52 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Media industry and the overall market, CINEMARK HOLDINGS INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 37.92% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

 

 

FOXA Chart FOXA data by YCharts

2. Twenty-First Century Fox Inc. (FOX) (FOXA)
Market Cap: $71.2 billion
Year-to-date return: -9.8%
Rating: Buy, A-

Twenty-First Century Fox, Inc. operates as a diversified media and entertainment company worldwide. It operates through Cable Network Programming, Television, Filmed Entertainment, and Direct Broadcast Satellite Television segments.

TheStreet said: "We rate TWENTY-FIRST CENTURY FOX INC (FOXA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

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

  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Media industry and the overall market, TWENTY-FIRST CENTURY FOX INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 36.30% is the gross profit margin for TWENTY-FIRST CENTURY FOX INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.25% is above that of the industry average.
  • Net operating cash flow has significantly increased by 53.66% to $1,761.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 15.01%.
  • Even though the current debt-to-equity ratio is 1.06, it is still below the industry average, suggesting that this level of debt is acceptable within the Media industry. Despite the fact that FOXA's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.09 is high and demonstrates strong liquidity.

 

IMAX Chart IMAX data by YCharts

3. IMAX Corp. (IMAX)
Market Cap: $2.7 billion
Year-to-date return: 26.1%
Rating: Buy, A-

IMAX Corporation, together with its subsidiaries, operates as an entertainment technology company specializing in motion picture technologies and presentations worldwide.

TheStreet said: "We rate IMAX CORP (IMAX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel its 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:

  • The revenue growth came in higher than the industry average of 4.2%. Since the same quarter one year prior, revenues rose by 29.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • IMAX's debt-to-equity ratio is very low at 0.04 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • The gross profit margin for IMAX CORP is rather high; currently it is at 66.37%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, IMAX's net profit margin of 0.62% significantly trails the industry average.
  • This stock has managed to rise its share value by 49.86% over the past twelve months. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • IMAX CORP has shown no change in earnings for its most recently reported quarter when compared with the same quarter a year earlier. 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, IMAX CORP reported lower earnings of $0.56 versus $0.63 in the prior year. This year, the market expects an improvement in earnings ($1.16 versus $0.56).
TWX Chart TWX data by YCharts

4. Time Warner Inc. (TWX)
Market Cap: $70.2 billion
Year-to-date return: -0.3%
Rating: Buy, A

Time Warner Inc. operates as a media and entertainment company in the United States and internationally. It operates through three segments: Turner, Home Box Office, and Warner Bros.

TheStreet said: "We rate TIME WARNER INC (TWX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, solid stock price performance and expanding profit margins. We feel its 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:

  • TWX's revenue growth has slightly outpaced the industry average of 4.2%. Since the same quarter one year prior, revenues slightly increased by 4.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.93, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.11, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Media industry and the overall market, TIME WARNER INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Compared to its closing price of one year ago, TWX's share price has jumped by 27.15%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.
  • TIME WARNER INC's earnings per share declined by 26.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TIME WARNER INC increased its bottom line by earning $4.39 versus $3.56 in the prior year. This year, the market expects an improvement in earnings ($4.66 versus $4.39).

 

 

DIS Chart DIS data by YCharts

5. Walt Disney Co. (DIS)
Market Cap: $187.3 billion
Year-to-date return: 17.2%
Rating: Buy, A+

The Walt Disney Company, together with its subsidiaries, operates as an entertainment company worldwide. The company operates in five segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products, and Interactive.

TheStreet said: "We rate DISNEY (WALT) CO (DIS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, notable return on equity and good cash flow from operations. We feel its strengths outweigh the fact that the company shows low profit margins."

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

  • DIS's revenue growth has slightly outpaced the industry average of 4.2%. Since the same quarter one year prior, revenues slightly increased by 7.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • DISNEY (WALT) CO has improved earnings per share by 13.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DISNEY (WALT) CO increased its bottom line by earning $4.25 versus $3.38 in the prior year. This year, the market expects an improvement in earnings ($5.08 versus $4.25).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Media industry average. The net income increased by 10.0% when compared to the same quarter one year prior, going from $1,917.00 million to $2,108.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Media industry and the overall market, DISNEY (WALT) CO's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • Net operating cash flow has increased to $2,918.00 million or 15.47% when compared to the same quarter last year. In addition, DISNEY (WALT) CO has also modestly surpassed the industry average cash flow growth rate of 15.01%.

 

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