Possible Near-Term Breakout for Marcus Corporation: Reasons Explored
Marcus Corporation: A Hidden Gem for Value Investors?
Ever wondered about the intrigue surrounding the Marcus Corporation (MCS)? As a conglomerate comprising two distinct entities, plus a portfolio of company-owned real estate, this stock offers a substantial discount to its probable underlying worth. Yet, as is commonly the case with such stocks, beware – it could be a value-trap.
Over a prolonged time period, MCS has underperformed the market significantly, with shares declining by about 11% over the past decade in contrast to the S&P 500's nearly threefold gain[3]. However, on occasion, this stock can witness a dramatic surge. Indeed, last autumn, the release of positive surprises in the company's quarterly earnings sent MCS shares soaring.
While the recent fervor for shares has dampened, with MCS down approximately 25% from its 52-week high, the nextuptick for Marcus Corporation shares may be imminent. Here's why.
Background: Marcus Corporation: A Midwestern Success Story
Established in the 1930s, when Ben Marcus, the patriarch of the Marcus family, launched a movie theatre in Ripon, Wisconsin, the corporation has expanded over the past nine decades into a mid-size owner/operator of movie theatres and hotels, primarily focusing on the midwestern United States, particularly Milwaukee and its surrounding areas[4].
In essence, The Marcus Corporation is a compact, midwestern, more homogeneous counterpart to the Tisch family's Loews Corporation (L). Theicular difference lies in Marcus' focus on movie theatre operations, rather than the merging of hotel holdings into a movie theater company like Loews[4].
The Marcus Corporation's history bears a resemblance to that of Marriott International (MAR) in that both companies, at one point, were invested in the fast food industry[4]. However, we'll delve into the company in its present state:
As previously mentioned, the Marcus Corporation operates under two separate segments today:
- Marcus Theatres: The cinema division manages cinemas under the Marcus Theatres brand throughout the midwest, in addition to a separate chain, Movie Tavern, which operates "cinema and draft house" style locations across the U.S., including the south and the northeast.
- Marcus Hotels: The hotel division manages 16 full-service hotel properties, primarily in the midwest, but also boasting hotels outside the midwest, such as The Garland in Los Angeles, California, the Platinum Hotel in Las Vegas, Nevada, and the Kimpton Hotel Monaco in Pittsburgh, Pennsylvania[4].
Interestingly, approximately 43 out of Marcus Corporation's 80 movie theatres and family entertainment centers are physically owned by the company[4]. Moreover, the corporation owns 6 of the 16 hotel and resort properties within its portfolio.
However, this emphasis on asset ownership has not translated into consistent growth over the years, particularly in recent times[3]. Nevertheless, much of this underperformance can be attributed to the pandemic and its continuing negative impact on movie theatre attendance and hotel demand. Despite shares' struggle to fully recover, recent developments suggest a comeback could be on the horizon.
Latest Developments and News
Following the distribution of positively-surprising news in the company's third-quarter 2024 earnings release, MCS shares climbed sharply. A closer look at the earnings report reveals why. In the September 2024 quarter, Marcus reported a 11.4% year-over-year increase in total revenue, a 56.6% increase in operating income, and a doubling in net earnings per diluted common share[4].
Encouraged by these improved results, investors propelled MCS stock from the mid-teens to the low-$20s per share within a matter of days. Nevertheless, the enthusiasm for shares cooled down since then, driving MCS down by approximately 25% from its 52-week high[3].
In February 2025, following the release of Marcus Corporation's next earnings report, investors largely recouped the post-earnings gains from the fall 2024 rally[4]. Despite the fact that Marcus once again reported impressive results for its Theatres division, the Hotel division experienced a steep decline in revenue, operating income, and adjusted EBITDA during the quarter[4].
This downturn was not unexpected, as the 2024 Republican National Convention, held in Milwaukee, took place during the September quarter, temporarily boosting performance for the company's Milwaukee-area hotels[4]. Nevertheless, investors may have overreacted in pricing in this temporary spike in hotel revenue/earnings as if it would continue and downgrading MCS subsequently, as further improvements to fiscal performance might prove challenging[4].
The results for the March quarter, although mixed, with higher-than-expected revenue but lower-than-expected earnings, may have reinforced the bearish perspective. However, subsequent news points to encouraging surprises on the horizon.
For instance, during the post-earnings conference call, MCS Chairman, President, and CEO Greg Marcus commented on the company's hotel business for the months ahead, saying:
The bookings continue to look solid with our group room revenue bookings for fiscal 2025 or group pace in the year running just slightly ahead of where we were at this time last year, even when including the RNC group[4].
Moreover, in a May 2025 press release, The Marcus Corporation boasted of how its movie theatres, similar to the motion picture exhibition industry overall, had a record box office over Memorial Day weekend[4].
Before delving deeper into the reasons these two recent developments might signal positive surprises for earnings, let's explore valuation to better comprehend how far MCS shares could ascend if investor sentiment shifts to bullish.
The Marcus Corporation: Valuation
Using metrics like price-to-earnings, MCS stock may not come across as overly cheap at present prices. At its current valuation, MCS trades for 44.2 times estimated 2025 earnings[4]. On an EV/EBITDA basis, shares exchange hands at a forward EV/EBITDA ratio of 8.7x[4].
This suggests that the analysts following MCS predict annual EBITDA of around $105.5 million this year based on the company's current enterprise value of $915.4 million[4]. Such a forecast implies a moderately high increase from reported EBITDA during the trailing twelve-month (TTM) period, which stood at $85.9 million[4].
However, given the strong performance of the overall U.S. Box Office recently, it's difficult to envision this trend confining itself to a modest impact on Marcus' overall performance this year[4]. According to BoxOfficeMojo.com, the April 2025 U.S. Box Office surged 103.5% year-over-year[4]. The May 2025 U.S. Box Office increased 75.8%[4].
With the summer movie season just revving up, higher double-digit year-over-year increases could be in store over the upcoming months[4]. Although Marcus comprises two business segments, and the hotel segment may capture more attention as the more alluring one, remember that the Theater segment contributes the lion's share of profitability.
Last year, the Theatres division accounted for 76.3% of Marcus' overall adjusted EBITDA[4]. This suggests that, irrespective of whether the hotel division underperforms this year or if management's positive statements ultimately prove to be overstatements, a robust summer box office could translate into stronger-than-expected results for Marcus[4].
Even slightly better-than-expected results could trigger another dramatic upward spike for MCS shares. Much like the previous release of favorable news in the fall of 2024, investors may again overreact, propelling shares in this less-liquid stock, with daily trading volume typically in the low six figures, back to the mid-$20s or even towards prior-year price levels in the high $20s/low-$30s per share[4].
The reasons for this are twofold:
- Compared to both movie theater and hotel stocks, Marcus Corporation trades at a discount on an EV/EBITDA basis. Renewed bullishness could precipitate a re-rating, surpassing the 10x forward multiple for Marcus, a ratio that might last temporarily in the near term[4].
- A 10x multiple, even for a slightly better-than-expected 2025 EBITDA forecast, yields an enterprise value of $1.15 billion[4]. Such a valuation, net of $388.4 million in debt and lease liability, and inclusive of around $19.9 million in cash, results in a net value of $786.5 million, or approximately $25 per share, representing an approximately 43.1% increase from present prices[4].
The Longer-Term Forecast
You might have deduced that I am advising investors to "buy MCS at $17.50 per share, hold it until earnings, and sell at $25 if results for the second quarter 2025 elicit the same response as the third quarter 2024 results did in late October/early November."
However, it's essential to remember that much of MCS' underperformance over the past decade was the result of pandemic-related headwinds[4]. Although factors like a decline in discretionary spending/corporate travel spending could hamper Marcus' hotel business, the potential impact on the Theater segment might be more subtle, at least compared to the pandemic's impact on this segment's performance during the early 2020s[4].
Furthermore, there's no guarantee that the Marcus family will opt for financial engineering in the short term to maximize the value of the stock price[4]. In fact, I see little possibility of Marcus becoming solely a hotel company, perhaps even a hotel REIT[4]. Marcus Theatres, on the other hand, could prove an attractive acquisition target for companies like Cinemark Holdings, AMC Entertainment (AMC), or even Cineworld, the U.K.-based movie theater company that owns Regal Cinemas in the U.S.[4].
However, given the family's near-century-long association with motion picture exhibition, I highly doubt they will divest themselves from the industry to extract full value from the company[4].
The Bottom Line
A visit to Marcus Corporation's corporate homepage elicits the impression that the company is well-aware of its hidden worth, with a description affirming that The Marcus Corporation is a leader in the lodging and entertainment industries, possessing substantial company-owned real estate assets [4].
Although the family-controlled company is unlikely to entirely dismantle in the near future, irrespective of whether by the family itself or an outsider, shares could record not only a rebound to $25 per share but a full return to pre-Covid prices in the years to come.
A more exhaustive exploration of MCS' corporate holdings is warranted to fully asses the likely current value of each and every property in Marcus's portfolio. However, for now, based on the company's recent resilience and the potential for improved performance in its Theater division, MCS shares are worth consideration at present price levels.
- The Marcus Corporation's unique blend of real estate, finance, business, and investing, particularly in the movie theater and hotel industries, offers an intriguing opportunity for investors seeking value stocks.
- Despite the recent downturn in Marcus Corporation shares, the company's recent financial performance, including positive surprises in the third-quarter 2024 earnings report and its historical focus on real estate asset ownership, suggest that the next uptick for MCS shares may be imminent.
