Independent Exhibitors Film Bulletin (1956)

DANGER IN LIQUIDATION (Continued from Page 21) PARAMOUNT PICTURES national Telemeter Corp. I "pay-as-you-see" TV broadcastingl; 50% interest in Chromatic Television Labs. Inc. (developer of low cost color TV tube). About 50% of total revenues derived abroad. Directors own about 30,000 shares of stock 11.3% of total). Em ployees: 4.000; stockholders: 22,117. Board chairman, A. Zukor. President, B. Balaban. Incorporated: New York. Address: 1501 Broadway, New York 34, N. Y. Stock traded: NYSE. BUSINESS: Paramount Pictures Corp. produces and distributes Class A motion pictures primarily. Owns Vistavision. Operates largest theatre chain in Canada. Holds 25% interest in Du Mont Laboratories as well as Du Mont Broadcasting Corp., 85% interest in Inter REPORT: The fortunes of Paramount Pictures in 1956 and 1957 depend, to a great extent, on the success of two motion pictures — "War and Peace" and "The Ten Commandments". The company has invested an enormous amount of time, talent and financial resources in the production of these two spectaculars. Although "War and Peace" will not be released until August, and "The Ten Commandments" is scheduled for the Christmas Holiday Season, Paramount has already mapped out multi-million-dollar promotional campaigns for them. Judging by the company's demonstrated ability to produce audience-winning pictures in the last few years, we believe the time and money expended on these two extravaganzas will be handsomely rewarded at the box office. Prior to the release of "War and Peace" in August, however, Paramount may encounter some rough sledding. For one thing, the huge advertising expenditures to promote these films are already being incurred and charged against earnings. Moreover, after offering a number of smash hits in the early part of 1955, the company later in the year entered a period of fewer releases extending well into the first quarter of 1956. Earnings for the first quarter, therefore, are believed to have dropped well below the yearearlier level. However, as the number of releases begins to rise again, and especially after "War and Peace" has made its appearance, earnings should begin to improve significantly. Full year net operating income thus will probably approximate the $4.36 a share reported for 1955. BUSINESS: Twentieth Century-Fox produces and distributes Class A feature films primarily. Owns CinemaScope, a wide screen projection process and is interested in Eidophor, a large screen theatre color TV system. Controls important theatre chains in Great REPORT: Twentieth Century-Fox has again presented the motion picture industry with an excellent medium for film presentation — CinemaScope 55. The introduction of "Carousel", the first picture made in this improved anamorphic technique, has met with remarkable public enthusiasm. So impressive were the picture and the photographic system that several leading newspapers in the nation headlined the premiere of "Carousel" on their front pages and praised CinemaScope 55 in their editorial columns. Paradoxically, the launching of "Carousel" badly penalized the company's earnings in the first quarter. To assure greatest publicity for the picture and the new photographic system, the company undertook an unprecedented promotional campaign utilizing radio, television and every available communication medium. The expenses involved in this advertising program, coupled wth foul weather in the greater part of the nation during the month of March, which sent theatre attendance far below the year earlier level, cut deep into profits. The first quarter report, when released, is therefore expected to show a very unfavorable year-to-year earnings comparision. A significant recovery in profits is likely in the second In addition to its motion picture producing and distributing business, Paramount also has substantial investments in the electronic industry. Particularly notable at this time is its 50% interest in the Chromatic Television Laboratories, which company has been developing a low cost color television tube. The color television industry is expected to demonstrate vigorous growth trend over the next few years. Within the hypothesized 1959-61 economy, Paramount's overall revenues are projected to an average of $145 million annually, earnings to $5.75 a share and dividends to $3. Capitalized at an 8.7 earnings multiple and on a dividend yield basis of 6%, consistent with past norms adjusted for trend, such results would command an average price of 50. ADVICE: Paramount Pictures' price history is too short to enable us to evolve a Rating through correlation analysis. Reference to industrywide capitalization ratios, however, suggests that at its current price, the stock is undervalued. The estimated dividend yield during the next 12 months is 6.1% on the basis of the regular payment alone; if the dividend should be liberalized to $2.40, as we think possible, the return would be a handsome 7.3%, far superior to the average 5.0% return provided by all dividend-paying stocks under survey. Moreover, the stock possesses a 3to 5-year appreciation potentiality of 52%, substantially larger than the average 21% gain projected for all stocks. We accordingly classify Paramount Pictures in Group II (Underpriced). S. P. Skouras, Vice President's, J. Moskowiti, S. C. Einfeld, W. C. Michel, M. Silverstone. Incorporated: Delaware. Address: 444 West 54th Street, New York 19, New York. Stock traded: NYSE. quarter, however. In the weeks ahead, "Carousel" will be given a much wider distribution. Moreover, recently released "The Man in the Gray Flannel Suit" has also been showing hefty box office results. With many other highly promising features, such as "The King and I" and "Bus Stop" starring Marilyn Monroe, scheduled for showing after mid-year, the company will probably be able to extend an improving earnings trend well into 1957. Notwithstanding a probably poor first quarter showing, we foresee earnings for the full year at a level well ahead of the $2.28 reported for 1955. Over the next 3 to 5 years, film rentals, notably those from the rapidly expanding foreign market, are expected to enjoy a healthy growth. The company's oil and gas properties are also likely to yield substantial income by the end of this decade. We project average annual revenues in the hypothesized 1959-61 economy to $140 million, earnings to $4.65 a share and dividends to $2.50. Capitalized at 8.6 times earnings to yield 6.3%, consistent with past norms adjusted to trend, such results would command an average price of 40. (Continued on Page 30) TWENTIETH CENTURY-FOX Britain, Australia and New Zealand. Foreign revenues account for about 48% of receipts. Labor costs, about 45% of revenues. Directors own or control about 4% of total outstanding common shares. Company employs about 9,000, has 19,000 stockholders. President, Page 22 Film BULLETIN May 14, 1954