Milwaukee-based The Marcus Corporation (MCS) reported first quarter 2012 earnings of 42 cents per share, beating the Zacks Consensus Estimate of 40 cents and the year-earlier quarter earnings of 34 cents per share.
The entertainment and lodging company’s revenues were up 8.7% year over year to $123.9 million. The increase in revenue was due to record performance by the company’s movie theater division, Marcus Theater, as well as the lodging division, Marcus Hotels and Resorts.
The Marcus Hotels & Resorts division posted a 9.8% growth in revenues and an identical growth in revenue per available room (RevPAR) based on higher occupancy levels and room rates arising from an upside in business traveler and leisure demand.
Marcus’ box office revenues jumped 8.0% year over year during the reported quarter benefiting from the success of the films released this summer. The company generated the highest revenue from the film Harry Potter and the Deathly Hallows: Part 2. Other movies that also contributed to growth were Transformers: Dark of the Moon, Hangover Part II and Cars 2.
Additionally, response for 3D movies is encouraging and in the current quarter out of the 7 top films, 6 movies were 3D, which further drove growth.
Operating income of Marcus rose 20.2% to $23.3 million in the reported quarter, as the entertainment division's operating income increased 16.1% and lodging division operating income grew 25.3%.
Financial Position
At the end of the quarter, the company had cash and cash equivalents of $6.8 million, long-term debt of $178.1 million and shareholders' equity of $346.6 million.
During the quarter, company repurchased 442,000 shares and also reduced its debt-to-total-capitalization ratio to 36%.
Our Take
Marcus reported better-than-expected results. Accordingly, we expect analysts’ estimates to go up in the coming days. Moreover, with a strong booking window, the company’s lodging division is expected to perform well in 2012.
Management continues to look for opportunities to grow hotels under management contracts. Moreover, with limited supply growth in the market, management expects to gain pricing power as the economy improves.
The company expects the fall and holiday season for Marcus Theater to be strong with films like Moneyball, Footloose, Paranormal Activity 3, The Twilight Saga: Breaking Dawn – Part 1 and The Muppets in the pipeline. To further boost income, the division is focusing on improving its technology and extending its food and beverage concepts to additional theaters.
Marcus currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating. We are also maintaining our long-term Outperform recommendation on the stock. The competitors of Marcus include China Lodging Group Limited (HTHT) and Intercontinental Hotels Group plc. (IHG).
CHINA LODGING (HTHT): Free Stock Analysis Report
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MARCUS CORP (MCS): Free Stock Analysis Report
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