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Lions Gate (LGF.A) Down 6.9% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Lions Gate Entertainment Corporation (LGF.A - Free Report) . Shares have lost about 6.9% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Lions Gate Reports Q3 Loss, Revenues Increase Y/Y

Lions Gate Entertainment adjusted net income declined to $34 million in third-quarter fiscal 2017 in comparison with year-ago figure of 55 million. Moreover, the company reported net loss of $31 million, in comparison with net income of $33 million.

On the revenue front, Lions Gate witnessed a 12.1% year-over-year increase to $752 million, mainly due to a surge in Television Production and Starz acquisition.

The company’s adjusted EBITDA came in at $138 million, in comparison with $54 million reported in the prior-year quarter. The company’s filmed entertainment backlog was nearly $1.4 billion at the end of the fiscal third quarter.

Segmental Performance

Despite robust box office performances of Boo! A Madea Halloween and Hacksaw Ridge in the reported quarter, Motion Pictures’ revenues declined 13% year over year to $440 million primarily due to tough year-over-year comparison. In the prior-year quarter, the company released The Hunger Games: Mockingjay Part 2.

Segment profit jumped 55% to $51 million, primarily due to reductions in direct operating expenses as well as distribution and marketing costs. Segment profit margin expanded 510 basis points to 11.6%.

Media Networks segment formed after the acquisition of Starz reported revenue of $85 million. The segment profit came in at $33 million, representing profit margin of 39%.

Television Production revenues surged 39% to $229 million, driven mostly due to rise in television deliveries, which includes episodes of Orange is the New Black, the new series Dear White People and the three-hour musical event Dirty Dancing. Moreover, segment profit soared 117% to $26 million, driven by decrease in distribution and marketing expenses. Segment profit margin expanded 410 basis points to 11.4%.

Financial Details

Lions Gate ended the third quarter with cash and cash equivalents of $595 million, film obligations and production loans of $162 million and shareholders’ equity of $2,322 million. The company generated free cash flow of $40 million, in comparison with $62 million in the prior-year quarter.

Lions Gate, which shares space with major studios like Twenty-First Century Fox, is a film studio engaged in the production and distribution of motion pictures for theater and straight-to-video release as well as television programming for cable and broadcast networks.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimate flatlined during the past month. There has been one upward revision for the current quarter compared to one downward.

VGM Scores

At this time, Lions Gate's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for value investors than growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting a below average return from the stock in the next few months.


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