A month has gone by since the last earnings report for Lions Gate Entertainment (LGF.A). Shares have added about 19.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lions Gate 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.
Lionsgate Q3 Earnings Beat Estimates, Revenues Down Y/Y
Lionsgate reported third-quarter fiscal 2021 adjusted earnings of 21 cents per share that beat the Zacks Consensus Estimate by 23.5% and surged 50% year over year.
However, revenues decreased 16.2% year over year to $836.4 million but beat the consensus mark by 7.9%.
Motion Picture (29.9% of revenues) revenues decreased 47.2% year over year to $250.3 million, primarily attributed to theatre closings related to the coronavirus pandemic.
Markedly, film and television library revenues, on a trailing 12-month basis, grew to $765 million in the reported quarter.
Moreover, the Motion Picture segment generated a profit of $50 million, up 2% year over year.
Television Production (27.3% of revenues) revenues increased 20.5% year over year to $228.2 million. Segment profit was $29.5 million against loss of $5.7 million reported in the year-ago quarter.
The Media Networks segment (48.6% of revenues), formed after the acquisition of Starz, reported revenues of $406.2 million, up 6.2% year over year, driven by increased revenues from STARZPLAY International. Segment profit declined 20% to $81.7 million.
Starz Networks revenues increased 2.1% year over year to $375.3 million. STARZPLAY International revenues in the quarter surged to $17.7 million, up 190.2% year over year. Streaming services revenues soared 51.7% year over year to $13.2 million in the reported quarter.
Media Networks global subscribers, including STARZPLAY Arabia, a non-consolidated equity method investee, increased to 28 million, with global OTT subscribers increasing 900K to 14.6 million, 52% of the total.
STARZPLAY International OTT subscribers grew 26% in the quarter and domestic OTT subscribers posted solid gains of 300K.
Lionsgate’s adjusted OIBDA grew 7.9% year over year to $133.8 million in the reported quarter.
Direct operating expenses, as a percentage of revenues, declined 460 basis points (bps) on a year-over-year basis to 54.9%.
Moreover, distribution and marketing expenses, as a percentage of revenues, fell 690 bps on a year-over-year basis to 21.1%.
However, general & administrative expenses, as a percentage of revenues, increased 290 bps year over year to 13.8%.
Operating income was $37.1 million in the reported quarter against loss of $39.5 million in the year-ago quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2020, Lionsgate had cash and cash equivalents of $551.5 million compared with $463.7million as of Sep 30, 2020.
Moreover, as of Dec 31, 2020, total film obligations and production loans amounted to $524 million compared with $405.2 million as of Sep 30, 2020.
Net cash outflow from operating activities was $44.2 million at the end of fiscal third quarter compared with $122 million at the end of the previous quarter and $215.9 million in the year-ago quarter.
Adjusted free cash flow was $110.7 million compared with free cash flow of $113 million in the previous quarter and $88.4 million in the year-ago quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -46.43% due to these changes.
At this time, Lions Gate has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Lions Gate has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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