Lionsgate Shares Plummet Following Disappointing Earnings

Lionsgate shares have been hammered in the wake of disappointing earnings and the company indicating that performance is tracking under previous forecasts.

Shares slid by 27%, falling $6.92 to $18.53 in trading on the New York Stock Exchange for its lowest close in more than three years. The stock’s low trade came at $16.21 before the issue rebounding in the last hour of trading.

The company had cited a soft performance by its movies — mostly notably “The Hunger Games: Mockingjay Part 2” — as the key reason for falling short of Wall Street expectations in its earnings for its third fiscal quarter, reported after the market closed Thursday. The fourth and final “Hunger Games” movie grossed $650 million worldwide, the lowest total of the four titles in the hit Jennifer Lawrence franchise.

Lionsgate CEO Jon Feltheimer provided specifics of the impact during an earnings call Friday with analysts. “‘Mockingjay 2’ is underperforming our ultimate profit margins by over $100 million, much of which hit in our guidance period,” he explained.

Feltheimer also said the studio is tracking below its previous forecast for $1.1 billion to $1.2 billion in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in fiscal 2016, ending March 31. He did not offer specific numbers and said Lionsgate would not offer more financial guidance until May, when it will have the results of “Gods of Egypt,” which opens Feb. 26, and “Allegiant” — the third movie in the “Divergent” franchise — which debuts on March 16.

Lionsgate often updates its guidance on EBITDA on its analyst conference calls.

Lionsgate disclosed in a regulatory filing on Thursday that it plans to restart talks to acquire Starz a year after making an investment in the premium cable network. Lionsgate execs offered little guidance on that front during the conference call and would not indicate whether any talks have commenced.

Shares of Starz dropped 20% to $24.83. Lionsgate has a 15% voting stake in Starz.

J.P. Morgan analyst Alexia Quadrani reiterated her “overweight” rating Friday and said the price makes Lionsgate valuation “extremely attractive at these levels with likely stronger growth and margin expansion ahead.”

 

 

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