Lions Gate Entertainment Corp. LGF, producer and distributor of motion pictures for theatrical and straight-to-video release, is expected to report fourth-quarter fiscal 2016 results on May 25, 2016, after the closing bell.
Last quarter, the company posted a negative earnings surprise of 22.9%. Notably, the company has missed the Zacks Consensus Estimate in three of the last four quarters, with an average earnings miss of 212.9%. Let’s see how things are shaping up for this announcement.
Factors Influencing the Quarter
In the previous two quarters, Lions Gate missed the Zacks Consensus Estimate and thus, analysts remain skeptical about the company’s performance in the fourth quarter of fiscal 2016 . We note that weakness in theatrical film slate performance has impacted the company’s performance in the past. Increase in production expenses is also hampering the company’s profitability.
The company has made a major investment in one of the leading game developers and publishers Telltale Games. This marks the company’s entry into the game arena. The investment is seen as part of the company’s diversification strategy. The company is also witnessing strong momentum in television distribution as well as syndication business.
Our proven model does not conclusively show that Lions Gate Entertainment is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:
Zacks ESP: ESP for Lions Gate Entertainment is -250.00%. This is because the Most Accurate estimate stands at a loss of 7 cents, whereas the Zacks Consensus Estimate is pegged at a loss of 2 cents.
Zacks Rank: Lions Gate Entertainment carries a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of -250.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:
TiVo Inc. TIVO has an Earnings ESP of +25.00% and a Zacks Rank #1.
Best Buy Co., Inc. BBY has an Earnings ESP of +2.86% and a Zacks Rank #2.
DSW Inc. DSW has an Earnings ESP of +2.17% and a Zacks Rank #3.
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