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Lions Gate (LGF.A) Up 6% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Lions Gate Entertainment Corporation (LGF.A - Free Report) . Shares have added about 6% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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 Misses on Q4 Earnings, Tops Sales Estimate

Lions Gate Entertainment reported fourth-quarter fiscal 2017 quarterly numbers, wherein the company posted earnings per share of $0.28, missing the Zacks Consensus Estimate by a penny.

On the revenue front, Lions Gate witnessed a sharp increase of 58.8% year over year to $1,256.1 million and also surpassed the Zacks Consensus estimate of $1,206 million. This can primarily be attributed to a surge in Motion pictures revenues and Starz acquisition. However, on a pro forma basis revenues increased 3%.

The company’s adjusted EBITDA came in at $162.7 million, in comparison with $0.7 million reported in the prior-year quarter. On a pro forma basis adjusted EBITDA increased 27% year over year. The company’s filmed entertainment backlog was nearly $1.4 billion at the end of the fiscal fourth quarter.

Segmental Performance (On Pro forma basis)

Motion Pictures’ revenues increased 7.3% year over year to $654 million on account of robust performance of La La Land, winner of six Academy Awards, John Wick: Chapter Two, and The Shack.

Segment profit came in at $52 million, up sharply from the year-ago-quarter of $2.5 million, primarily due to increase in revenues which more than offset direct operating expenses as well as marketing costs. Segment profit margins increased to 8.0% in the quarter from 0.4%.

Media Networks segment formed after the acquisition of Starz reported revenue of $370.8 million, up 1.4%. The segment profit increased 10.7% to $124.8 million. Operating profit margin expanded 290 basis points to 33.7%.

Television Production revenues dropped 3.5% to $242.6 million. Moreover, segment profit declined 69.1% to $13 million. Segment profit margin declined to 5.4% from 16.7% reported in the year-ago quarter.

Financial Details

Lions Gate ended the fourth quarter with cash and cash equivalents of $321.9 million, film obligations and production loans of $367.2 million and shareholders’ equity of $2,514.4 million. The company generated free cash flow of $189.4 million, in comparison with $92.9 million used in the prior-year quarter.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 25.5% due to these changes.

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 an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.

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

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.


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