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Lions Gate (LGF.A) Down 7.5% Since Earnings Report: Can It Rebound?

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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 lost about 7.5% in that time frame.

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

Lions Gate’s Q3 Earnings & Revenues Improve Y/Y

Lions Gate Entertainment delivered third-quarter fiscal 2018 quarterly numbers, wherein both earnings and revenues surged year over year.

Q3 Highlights

Lions Gate’s adjusted earnings came in at 48 cents per share, compared with the year-ago earnings of 20 cents. Earnings also surpassed the Zacks Consensus Estimate of 41 cents. Moreover, on a GAAP basis the company reported earnings of 87 cents, against a loss of 18 cents. On the revenue front, Lions Gate witnessed a surge of 51.9% year over year to approximately $1,142.7 million. This can primarily be attributed to a surge in Media Networks revenues. Moreover, on a pro-forma basis, revenues rose 7.9%.

The company’s adjusted operating income before depreciation and amortization (OIBDA) came in at $177.6 million, in comparison with $85.8 million reported in the prior-year quarter. On a pro-forma basis, adjusted OIBDA almost remained flat year over year. The company’s filmed entertainment backlog was nearly $1.2 billion at the end of the fiscal third quarter.

Segmental Performance (On Pro-forma basis)

Media Networks’ segment formed after the acquisition of Starz reported revenues of $382.9 million, up about 6% year over year on account of surge in revenues from over-the-top (OTT) and international digital media licensing arrangements. Moreover, segment profit came in at $128.3 million, up 6%. Segment profit margins expanded to 33.5% in the quarter from 33.6%.

Motion Pictures reported revenues of $539.1 million, which surged nearly 14% owing to robust theatrical revenues driven by blockbuster hits like Wonder and sturdy international performances of La La Land as well as American Assassin. Moreover, Home entertainment revenues gained from Starz third party distribution business, partly offset by lower feature films.  The segment logged profit of $54.3 million, down 2.9% year over year.

Television Production revenues dropped 1.6% to $227.3 million, mainly due to decline in syndicated licensing revenues. Moreover, segment profit plunged 17.5% to $22.7 million, while the segment profit margin contracted 190 basis points to 10%.
 
Financial Details

Lions Gate ended the quarter with cash and cash equivalents of $216.7 million, film obligations and production loans of $331.2 million and shareholders’ equity of $3,060.1 million. The company generated $221.3 million as cash flow from operating activities in the first nine months of the fiscal.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. There have been seven revisions lower for the current quarter. In the past month, the consensus estimate has shifted by -92.6% due to these changes.

VGM Scores

At this time, LGF.A has a strong Growth Score of A, though it is lagging a lot on the momentum front with a C. The stock was also allocated a grade of C on the value side, putting it in the middle 20% 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.

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

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise LGF.A has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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