Milwaukee-based The Marcus Corporation ( MCS ) reported second quarter 2012 earnings of 10 cents per share, way ahead of the Zacks Consensus Estimate of a loss of 2 cents. Reported earnings also surpassed the year-earlier quarter earnings of 7 cents per share.
The entertainment and lodging company's revenues were up 3.8% year over year to $90.1 million. The increase in revenue was attributable to improved performance by the company's lodging division, Marcus Hotels and Resorts.
The Marcus Hotels & Resorts division posted a 9.4% growth in revenues and an identical growth in revenue per available room (RevPAR), based on higher occupancy levels and room rates arising from an upside in business traveler and leisure demand. The company witnessed upside in average daily rate for the fourth consecutive quarter.
Marcus' box office revenues fell 2.0% year over year during the reported quarter due to weaker line up of films as compared with the year-ago quarter. The top performing films during the quarter were The Twilight Saga: Breaking Dawn - Part 1, Paranormal Activity 3 andPuss in Boots (3D). Additionally, the company continues to benefit from the massive popularity of 3D movies.
Operating income of Marcus rose 15.8% to $6.3 million in the reported quarter, as the lodging division operating income grew 57.7%, partially offset by a 8.2% drop in entertainment division's operating income.
During the quarter, the company repurchased 119,000 shares and also continued to reduce its debt-to-total-capitalization ratio. However, Marcus will disclose the details of balance sheet in its 10Q filing given the accounting treatment of digital cinema master license agreement is not yet finalized.
Marcus reported better-than-expected results in the second quarter of 2012. Concurrently, we expect the analysts' estimates to go up in the coming days. The Zacks Consensus Estimates for 2011 and 2012 are pegged at 63 cents and 76 cents, respectively. Moreover, with a strong booking window, the company's lodging division is expected to perform well in 2012.
Management further seeks to develop hotels under management contracts and continues to make efforts to refurbish its existing properties. Moreover, with limited supply growth in the market, management expects to gain pricing power as the economy improves.
The company expects the holiday season to be accretive for Marcus Theater with films like The Muppets, Hugo (3D), Arthur Christmas (3D), Mission: Impossible - Ghost Protocol, Sherlock Holmes: A Game of Shadows and Alvin & the Chipmunks: Chip-Wrecked. Other films releases in the pipeline for the upcoming holiday season include The Girl with the Dragon Tattoo, Adventures of TinTin (3D), We Bought a Zoo and War Horse. To further boost income, the division is focusing on improving its technology and extending its food and beverage concepts to additional theaters.
Marcus currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating. We are also maintaining our long-term Outperform recommendation on the stock. The competitors of Marcus include Wyndham Worldwide Corporation ( WYN ) and Choice Hotels International Inc. ( CHH ).