Poseidon sunk the box office as the big budget film flopped, bringing in just $20 million and opening in second place. Poor performance from Poseidon was the primary cause for an 8.4% decline in box receipts versus the same weekend a year ago. The negative comp broke a six weekend winning streak and the weak Poseidon opening along with lower than expected receipts from Mission: Impossible 3 will surely have observers worried about the box office again. I would use any weakness in shares of theatre leader Regal Entertainment (RGC) to add to positions.
The upcoming weekends is where comparisons should really pick up, especially with the June 9 opening of the next Pixar film, Cars, followed by the July opening of the sequel to Pirates of the Caribbean. This coming weekend should have two successful openings as well with The DaVinci Code and the next film from Dreamworks Animation, Over The Hedge. This coming weekend has a tough comparison against last year’s release of the final installment of the Star Wars series, but Memorial Day weekend looks good when the latest X-Men movie opens.
Despite a couple of weekends of weaker than expected results, I continue to think RGC can rise to the mid $20s over the next six months, a period during which investors can collect two quarterly dividends of 30 cents each. Keep in mind that the box office comparisons are very easy against a long string of down weekends in 2005. In fact, despite this past weekend, box office receipts are still up almost 23$ this quarter against analysts estimates that assume gains of 10-12%.