Shares of Lionsgate jumped Friday in the wake of a robust earnings report that came in far above Wall Street expectations.
Lionsgate soared more than 14.2%, rising $2.08 to $16.68 in trading on the New York Stock Exchange with five times the average volume. That’s nearly double the $8.60 price for the shares on Jan. 13, when Lionsgate bought Summit Entertainment for $412.5 million.
After the markets closed Thursdsay, Lionsgate reported higher quarterly earnings of $75.5 million, or 56¢ a share for its second quarter ended Sept. 30, vs. a loss of $25.3 million, or 27¢ a share, in the year-ago quarter. Revenues surged 97% to $707 million on strong homevideo revenues from “The Hunger Games” and domestic box office from pics including “The Expendables 2,” “The Possession” and “Step Up Revolution.”
Results were far above the consensus among Wall Street analysts, which had been for 9¢ a share and shares jumped in after-hours trading.
Alan Gould of Evercore Partners, who has an “overweight” rating on the stock with an $18 price target, noted in a report that it was Lionsgate’s best quarter ever as measureed by earnings or by ongoing cash from operations and that revenue had topped Evercore’s estimate by almost $100 million. He noted that EBITDA for the quarter was $104 million and should give investors “additional confidence” that the company’s three-year $900 million target — issued in May — is very achievable.
Doug Cruetz of Cowen, who has an outperform rating, noted in his report that his EBIDTA estimate for the quarter was $33 million and predicted that the “Hunger Games” franchise and the Summit acquisition will drive annual free cash flow in excess of $300 million over at least the next three years.
“We believe LGF shares have at least 20% upside relative to the next 12 months,” he added.
In a conference call with analysts Friday morning, CEO Jon Feltheimer reiterated his assertion that the rest of the fiscal year will be strong, citing gains from the international box office via new and renewed output deals, positive response to new TV series “Anger Management” and “Nashville” and growing digital revenues.
Feltheimer said the company is beginning to “see the benefits of patience and discipline” in the studio’s longterm approach. In response to an analyst question, he said the overall sector has been able to perform well amid economic uncertainty.
“Entertainment media has been somewhat recession-proof,” he noted.
The CEO also touted the fifth and final “Twilight” film — “The Twilight Saga: Breaking Dawn Part 2,” which opens Nov. 16. He said advance ticket sales are ahead of the fourth “Twilight” film and noted that fans have already started camping out in downtown Los Angeles ahead of Monday’s premiere at the Nokia Center.
“We’re looking to a big opening weekend that will take our slate past a billion dollars at the domestic box office this year,” he said.
Lionsgate execs told analysts that they have high hopes for another young adult franchise in “Divergent,” based on the series of dystopic novels by Veronica Roth. Feltheimer pointed out that book sales have hit 2 million — putting the series ahead of “Twilight” and “The Hunger Games” at the equivalent point in those sales cycles.
“We’re putting it out to our fans right now that we think this is the next big franchise,” Feltheimer said.
“Divergent” stars Shailene Woodley and is directed by Neil Burger. Lionsgate has already dated the film for March 21, 2014 — the same weekend on which “Hunger Games” opened.
“By putting it, frankly, in the original ‘Hunger Games’ timeslot, we’re indicating the amount of support we have,” Feltheimer said.
Patrick Wachsberger, co-chairman of the motion picture group, told analysts that international territory sales at the AFM have already covered 80% of the budget. “We did extremely well with ‘Divergent,’?” he said.