Roth MKM analysts raised their Q2 estimates for AMC Entertainment (NYSE:AMC) in a note Thursday due to a "late period box office rally" that exceeded expectations.
This adjustment comes despite ongoing caution regarding the company's high debt and limited free cash flow (FCF) outlook.
Roth MKM attributes the improved estimates to the significant outperformance of the film "Inside Out 2" at the end of the quarter.
The analysts now forecast revenue of $1.012 billion, a 25% decline year-over-year, and adjusted EBITDA of $7 million, which represents a substantial increase from their previous forecast of $946 million in revenue and a $54 million loss in adjusted EBITDA. This places Roth MKM ahead of the Street's consensus of -$7 million adjusted EBITDA.
The Roth MKM note indicates declines in both Domestic and International revenues of 25% and 23%, respectively. In the U.S., attendance is estimated to be down 26%, with a modest lift in average ticket prices. Per capita concession spending is expected to decline by 1.5% due to a less popcorn-friendly film slate compared to last year.
Internationally, the investment firm says a 25% decline in attendance is partially offset by a 1% increase in both average ticket price and per capita concession spending.
Roth MKM estimates that AMC ended Q2 with $335 million in cash, down from $624 million at the end of Q1. The Q2 FCF burn is estimated at nearly $250 million, higher than last year's $61 million. Despite these challenges, a stronger movie lineup is expected to push FCF back into positive territory for the latter half of the year, estimated at around $125 million, reducing the need for additional equity raises. Total debt is projected at approximately $4.45 billion.
Looking ahead, Roth MKM anticipates a sequential improvement in Q3 with a forecasted revenue of $1.320 billion and adjusted EBITDA of $152 million, surpassing the consensus estimates of $1.290 billion and $138 million, respectively.
They predict that the Q3 box office will decline by 6% year-over-year but will show quarter-over-quarter growth, marking the high point for 2024 on an absolute basis.
While the analysts remain cautious about AMC's financial health and valuation, they acknowledge the positive impact of the recent box office performance on the company's short-term outlook.