Lions Gate (LGF) Beats On Q1 Earnings, Revenues; Stock Up

Shares of Lions Gate Entertainment Corp. LGF increased 7.7% during after-market trading hours on Aug 5, after the company reported better-than-expected results for the second consecutive quarter.

Lions Gate reported first-quarter fiscal 2017 earnings (including stock-based compensation expenses) of 9 cents. The Zacks Consensus Estimate was of a loss of 23 cents. However, the company’s earnings plunged 65.3% year over year.

On a reported basis, including one-items, earnings came in at 19 cents per share as against 32 cents in the year-ago quarter.

On the revenue front, Lions Gate witnessed a 35% year-over-year increase to $553.6 million, mainly due to a surge in Television Production revenues and also due to growth in revenues from all categories of the Motion Pictures segment. The figure also surpassed the Zacks Consensus Estimate of $501 million.

LIONS GATE ETMT Price, Consensus and EPS Surprise

LIONS GATE ETMT Price, Consensus and EPS Surprise | LIONS GATE ETMT Quote

The company’s adjusted EBITDA came in at $40.7 million, considerably below the prior-year figure of $71 million.

The company’s filmed entertainment backlog was more than $1.5 billion at the end of the fiscal first quarter.

Lions Gate to Acquire Starz

Lions Gate Entertainment announced the acquisition of media and entertainment company Starz. The cash and stock deal is valued at $4.4 billion or $32.73 per share. Boards of directors of both companies have approved the deal. However, the deal is pending approval from shareholders of the companies as well as regulatory authorities. The transaction is expected to be closed by the end of 2016.

After the completion of the deal, the company expects more than $200 million in annual cash savings.

Segmental Performance

During the reported quarter, Motion Pictures’ revenues of $362.5 million jumped 31.6% year over year. The upside was attributable to more than a double rise in Theatrical revenues to $47.2 million, a 16% increase in Home Entertainment revenues to $150.3 million and a 10% gain in Television revenues to $53.3 million.

On the other hand, International revenues increased 34% to $113.8 million buoyed by worldwide box office performance of Now You See Me 2. The movie has already collected above $300 million at the international box office.

Television Production revenues jumped 43.1% to $191.1 million, largely on the strength of domestic revenues that soared 159.4% to $153 million. However, International and Home Entertainment declined 53.3% and 51.6% to $27.7 million and $6.8 million, respectively.

During first quarter, 64 episodes and 49 hours of domestic television series were aired that comprised episodes of Greenleaf, Monica the Medium, Casual, Feed the Beast, Graves, Guilt, Nashville, Family Feud, etc.

Financial Details

Lions Gate ended first quarter with cash and cash equivalents of $69.9 million, film obligations and production loans of $560.9 million, and shareholders’ equity of $870.1 million. The company generated free cash flow of negative $19.3 million. In the prior-year quarter, it had generated free cash flow of $94.7 million.

Lions Gate, which shares space with major studios like Twenty-First Century Fox, Inc. FOXA, 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.

Zacks Rank

Lions Gate currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in this sector include MSG Networks Inc. MSGN and World Wrestling Entertainment Inc. WWE. Both these stocks hold a Zacks Rank #2 (Buy).

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