Movie theater company AMC Entertainment (AMC 20.80) dropped a bombshell on its investors last night that is blowing up the stock this morning. That bombshell was guidance for the second quarter that fell far short of analysts' average expectations and full-year guidance that was short on earnings. The update abruptly altered the company's characterization in early May that it was off to a tremendous and record start in 2017.
Shares of AMC are down 24% in pre-market action.
Reflecting the benefit of recent acquisitions, AMC expects to report second quarter revenues between $1.200 and $1.204 billion versus $764 million from the same period a year ago. The high end of the guidance range is less than what analysts were expecting, yet the real kicker was the company's bottom-line projection.
AMC expects to report a net loss for the second quarter between $178.5 million and $174.5 million, or ($1.36)-($1.34) per diluted share, versus a small profit expected by analysts. In last year's second quarter, AMC reported net earnings of $24.0 million or $0.24 per diluted share. Its adjusted EBITDA is expected to range from $134.0-$136.0 million versus $129.6 million for the three months ended June 30, 2016.
The dour outlook for the second quarter was pinned on a $202.6 million pre-tax impairment charge related to AMC's investment in National CineMedia LLC and weak results for the North American industry box office, which decreased 3.3%. The U.S. industry box office declined approximately 4.4%, AMC said.
Box office trends in Europe were better, growing by a double-digit percentage year-over-year. The strength there, however, didn't offset weak results in North America, because the second quarter is seasonally the smallest quarter of the year for the European box office.
AMC said it expects a very challenging third quarter as well. Cognizant of that and its second quarter travails, the company has initiated a domestic cost reduction and revenue enhancement plan to better align its operating expenses with theater attendance, and reduce general and administrative costs, for the balance of 2017 and into 2018. Strategic pricing, reduced operating hours and staffing levels, and promotional incentives will be included in that plan.
In conjunction with its second quarter update, AMC provided its FY17 guidance for the first time. That guidance calls for total revenues to be between $5.10 billion and $5.23 billion, a net loss between $150.0 million and $125.0 million, and a diluted loss per share in the range of ($1.17) to ($0.97). AMC expects its adjusted EBITDA to be between $860.0 and $900.0 million versus $609.0 million for 2016.
The full-year guidance includes, among other things, no further impairment charges related to the NCM investment.