RealD Releases Less Than Stellar Earnings, But Shares Surge
Despite a lackluster second-quarter of fiscal 2014, 3D film technology company RealD (NYSE:RLD) and Wall Street were both upbeat about the company’s earnings. Shares surged in pre-market trading this morning by almost 19 percent after the company released its financial report for the quarter yesterday afternoon. RLD lost $4.7 million or $0.09 per share on revenue of $43.9 million, showing a deterioration on both the top and bottom lines. In the same quarter a year ago, the company lost $4.2 million or $0.08 per share on $55 million in revenue. Adjusted EBITDA was $13.7 million, compared to $12.2 million in the second quarter of fiscal 2013. Shares have lost 38 percent of their value since the beginning of the year as the popularity of 3D movies seems to be dwindling. However, the losses were not as bad as Wall Street had expected and investors reacted accordingly to the information.
As fiscal 2014 progresses, we continue to optimize RealD’s financial performance and position our company for the future,” said Michael V. Lewis, Chairman and Chief Executive Officer of RealD. “The success of Gravity demonstrates that RealD’s platform can deliver strong results when the combination of a high-quality 3D film, effective 3D marketing and optimum screen availability come together. At the same time, we are focusing on the expansion of our platform in faster growing emerging markets. With this in mind, we were pleased to announce new contract wins that collectively provide for 250 screens in two of the fastest growing cinema markets – China and Russia.”
Currently, the company has in theaters Gravity, Metallica: Through the Never, Free Birds and Thor: The Dark World. Upcoming in this quarter is Frozen, The Hobbit: The Desolation of Smaug, Walking With Dinosaurs and 47 Ronin. Gravity has been a huge hit for the company and will undoubtedly boost earnings for the current quarter. Also the The Hobbit: The Desolation of Smaug promises to be another blockbuster as fans have been eagerly awaiting the release of the second film in The Hobbit series.
The company is well aware that box office for movies available in 3D accounts for only 30 percent of box office earnings nowadays. That’s down 70 percent over the past three years. In 2009, 3D accounted for a whopping 81 percent of revenues for the movie Avatar.
RealD announced last Friday that it was laying off 35 employees at its facilities in California and Boulder Colorado. That number represents 20 percent of its workforce. Be that as it may, shares in the company are surging in this morning’s trading by over 20 percent and appear to be climbing higher. RealD may have lost on revenue for the quarter, but investors like what they see and are well aware that the company has several current and upcoming hits.
Disclosure: Author represents that she has no position in any stocks mentioned in this article at the time this article was submitted.
