Lions Gate Slumps After Quarterly Results Miss Estimates

Lions Gate Entertainment Corp. (LGF), the studio behind “The Hunger Games” movies, slumped the most in five years after reporting fourth-quarter results and providing guidance that fell short analysts’ estimates.

Lions Gate, based in Santa Monica, California, fell 12 percent to $26.13 at the close in New York, the biggest one-day decline since June 2009.

Revenue fell 8.1 percent to $721.9 million for the quarter that ended March 31, the company said in a statement yesterday. Analysts had projected $823.7 million on average, according to data compiled by Bloomberg. Adjusted earnings per share were 42 cents, compared with the 43-cent average estimate.

While the results were “light across the board,” one surprise was from television revenue, which was $169.7 million in the quarter, according to Matthew Harrigan, an analyst with Wunderlich Securities. He had projected $209.3 million. The company didn’t disclose a quarterly breakdown of its business divisions.

Chief Executive Officer Jon Feltheimer said the company expects to generate $1.2 billion to $1.3 billion in adjusted earnings before interest, taxes, depreciation and amortization in the three-year period through fiscal 2017. Revenue will be about $3.25 billion in 2017, he said.

‘Divergent’ Sales

Doug Creutz, an analyst at Cowen Securities LLC in New York, had projected EBITDA of $1.5 billion to $1.6 billion. The company’s earnings forecast is just “not that exciting,” Creutz, who rates the shares market perform, said in an interview.

In its last fiscal year, Lions Gate produced films that opened atop the box office including teen warrior features, “The Hunger Games: Catching Fire” and “Divergent.” The former was the highest-grossing movie in the U.S. in 2013, according to Box Office Mojo. Still, quarterly revenue from the film division, the company’s biggest unit, failed to match the year-earlier period.

On the call today, the company said the first film in its new “Divergent” franchise was forecast to generate $275 million in worldwide sales at the box-office, while the second installment may bring in between $350 million to $400 million.

“Frankly, we expect growth after that, although I think we’ve modeled it pretty conservatively in terms of what it’s going to contribute through 2018,” Feltheimer said.

Home entertainment revenue was $269.6 million, said Wunderlich’s Harrigan, trailing his projection of $346 million.

Fourth-quarter net income was $49.2 million, or 33 cents per share, compared with $163 million, or $1.10, a year earlier.

To contact the reporters on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net; Anousha Sakoui in London at asakoui@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net James Callan

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