Will Forex Headwinds Hit IMAX Corp's (IMAX) Q3 Earnings?

IMAX Corporation (NYSE:IMAX) is slated to report third-quarter 2016 numbers, after market close on Oct 20.

Last quarter, IMAX posted a negative earnings surprise of 10.00%. However, the company’s earnings surpassed the Zacks Consensus Estimate in only one of the previous four quarters, clocking an average beat of 7.33%. Let’s see how things are shaping up for this announcement.

IMAX CORP Price and EPS Surprise

IMAX CORP Price and EPS Surprise | IMAX CORP Quote

Factors Likely to Influence this Quarter

IMAX has been focusing on cashing in on the lucrative Chinese movie market. In a bid to expand its presence in the nation, IMAX inked a deal with a number of movie theatres in order to increase its presence in the country. Additionally, apart from China, IMAX continues to expand in countries like South Africa and other parts of Europe. However, uncertainty in the global macro-economic environment has induced high volatility in the foreign exchange market which may dampen margins for IMAX in this reporting quarter.

Apart from foreign exchange risks, the company also faces stiff competition from established players like AMC Entertainment Holdings, Inc. (NYSE:AMC) and Cinemark Holdings, Inc. (NYSE:CNK) .

Earnings Whispers

Our proven model does not conclusively show that IMAXis likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: IMAX has an earnings ESP of -100.00%. This is because the Most Accurate estimate stands at a breakeven while the Zacks Consensus Estimate is pegged at 2 cents.

Zacks Rank: IMAX has a Zacks Rank #4 (Sell). Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

A Stock to Consider

Here’s a company in the same sector that you may want to consider as our model shows it has the right combination of elements to post an earnings beat this quarter:

Live Nation Entertainment, Inc. (NYSE:LYV) , which has an earnings ESP of +6.00% and a Zacks Rank #2.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>