Imax Corp. reported a big drop in second-quarter profit Thursday as a dearth of blockbuster movies crimped box office revenues at its big-screen theatres, knocking its shares sharply lower.

The Toronto-based company picked some "horrible, horrible movies" that failed to lure audiences and it was too quick to stop screening others that performed well, such as car-racing action thriller Fast Five," said Marla Backer from Hudson Square Research in New York.

Imax's net income fell 87 per cent from a year ago, pushing its shares down by more than 16 per cent at Thursday's market close. The stock's $3.74 tumble to $19.43 was the sharpest one-day drop since late 2008.

"The stock is far more volatile than it needs to be because the management talks too many thing that don't matter," said Michael Pachter from Wedbush Securities in Los Angeles. "What is more important is to get more screens installed and they seem quite cavalier about their pace of installation."

Imax, which expects to build up its theatre network by 30 per cent annually and has targeted China, said its global expansion continued apace with strong theatre installations.

It said third-quarter box office was off to a strong start, generating $88-million in ticket sales for films such as the new Transformers and the final instalment in the Harry Potter series in less than a month. It made $98-million at the box office in all of the third quarter last year.

Imax installed 41 theatre systems in the quarter, compared with 21 a year ago, and upped its full-year forecast slightly to between 120 and 130 theatres.

The company reported net income of $1.8-million, or 3 cents a share, compared with $13.3-million, or 20 cents, a year ago.

Adjusted to exclude deferred tax provisions and charges tied to changing values of its stock compensation plan, it earned seven cents a share. Analysts had expected adjusted earnings of 20 cents a share, according to Thomson Reuters I/B/E/S.

Overall revenue rose 3 per cent to $57.2-million, in line with average estimates. Second-quarter film revenue was $18.7-million, down from $20.7-million. Gross box office from DMR (digital media remastering) titles was $107.7-million, Imax said, compared with $113.9-million in the second quarter of 2010, which had an $8-million boost from Avatar.

"While the quarter did not live up to our financial expectations, more fundamental to the long-term value of our business is the fact that we have signed 153 theatre deals year-to-date, are installing theatres at a rapid rate and are sitting on a record backlog of close to 300 Imax theatre systems," Imax chief executive officer Richard Gelfond said.

Despite the miss on earnings, analysts suggest Imax remains a strong long-term investment.

"There is no justification for this kind of decline," said Aravinda Galappatthige from Canaccord Genuity in Toronto. "The value of the company is driven by future growth and the fact that this was going to be bad quarter was known," he said.

"These guys are executing incredibly well on growing the footprint, and when we get a good box office … you can see how that network can deliver strong results," said Hudson Square's Ms. Backer, who has a "buy" recommendation on the stock and a price target of $40.