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July 23, 2007

Summer Box Office Growth Still On Track

The third quarter improvement in the summer box office continued over the weekend but at a slower pace. Led by the new Adam Sandler film, I Now Pronounce You Chuck and Larry, the box office for the top 12 films was up 3.5% according to data from BoxOfficeMojo.com. Harry Potter and the Order of the Phoenix came in second followed by the opening weekend for Hairspray. I had hoped for a few million more from the Potter film and Hairspray and a gain in the range of 6-8%. However, things are still shaping up well for this quarter with next weekend looking particularly good when The Simpsons Movie is expected to open to a big number. Some observers are looking for a monster opening in the $40-50 million range for The Simpsons Movie, while last year the #1 movie on the same weekend was Miami Vice which brought in just $25.7 million.

Since June 29th, which will be the start of the third quarter for the theatre exhibitors, the box office is up 11%. Theatre exhibitors begin to report earnings this week with my favorite, Regal Entertainment (RGC), announcing before the open on Thursday. I believe the strength so far this quarter will offset the fact that earnings will almost certainly fall short of estimates in 2Q due to the fact that the box office gained just 2.5% against analyst models that were built an upper single digit gain. Furthermore, the recent rally in interest rates, with the 10-year falling below 5%, makes RGC's current yield of 5.5% a lot more attractive and leaves the shares with good downside protection.

Posted by Steve Birenberg at July 23, 2007 09:11 AM in Box Office