The U.S. theater market may be relatively moribund, but growth prospects are good in emerging markets, where more and more people are entering the middle class and heading to the movies for entertainment. Cinemark (CNK), headquartered in Plano, Texas, is one of the primary beneficiaries. The company operates 461 multiplexes in the U.S., Mexico, Brazil and 11 other Latin American countries. Growth over the past five years has been blistering. In the first half of 2012, revenues jumped 11%, to $1.2 billion, and profits jumped 43%, to $93.7 million.
Cinemark probably can't keep up that pace, but the growth is far from over. The company says it plans to open 11 more theaters in 2012 and has signed agreements to open 16 more in 2013 and beyond. Analysts predict that earnings will grow at a 12% annual rate over the next several years. Meanwhile, the stock, at $23.16, sells for 15 times estimated 2012 earnings of $1.57 per share and yields 3.6%.
But what most impresses Osterweis's Berler is that Cinemark is delivering solid results despite a strong dollar (which results in money earned overseas getting translated into fewer bucks). That speaks to the strength of its Latin American business. If the currency headwinds abate, Cinemark could clean up, Berler says.
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