Lions Gate Sinks After Vin Diesel Film Flop Hurts Resultsby
Analyst questions earnings power after final `Hunger Games'
Diesel film highlights challenge of finding new franchises
Lions Gate Entertainment Corp. fell after reporting second-quarter results that missed analysts’ estimates due to box-office disappointments that included the Vin Diesel action film “The Last Witch Hunter.”
The shares dropped as much as 13 percent to $33.36 in extended trading, before paring some of the losses. Lions Gate reported a loss of $28.4 million, or 19 cents a share, excluding some items. Revenue of $476.8 million missed the $484.6 million average of 14 analysts’ estimates. Analysts had expected adjusted profit of 6 cents a share.
The box office failures highlight the pressures on the studio to find new film properties as its marquee young-adult franchise “The Hunger Games” comes to an end this year. “The Last Witch Hunter, made at an estimated cost of $90 million, was flagged by the studio as a potential series. Instead it triggered a $7.2 million write-off. “American Ultra” also flopped during the period.
“We remain cautious about the company’s ability to kick-start new franchises given what has become an increasingly competitive film market,” Doug Creutz, an analyst at Cowen & Co., said in a research note. The analyst, who has the stock at “market perform,” said it’s unclear how the studio will fill the earnings gap created once revenue from “The Hunger Games” slows.
“The Last Witch Hunter” has grossed $82.4 million worldwide, according to Box Office Mojo, a sum that’s split with theaters. It cost $90 million to make, according to Imdb.com, not counting marketing costs. “American Ultra,” which cost $28 million to produce, has taken in $15.4 million.
Beyond its core movie business, the studio’s results were hit by delays in the delivery of TV shows. The company said deliveries of several shows, including “Orange Is the New Black,” “Nashville” and “The Royals” will drive revenue growth in the second half of the fiscal year.
Some analysts remained more positive.
“Investors will focus more on management’s ability to grow its TV business and create additional franchises,” Amy Yong, an analyst at Macquarie Group Ltd., said in an interview. Yong, who rates the stock “outperform," described management as having a “near perfect track record.”
Lions Gate, run from Santa Monica, California, fell 2.8 percent to $38.28 in regular New York trading. The shares have advanced 20 percent this year.
On Nov. 20, the company releases the fourth and final installment of “The Hunger Games.” Last year’s “The Hunger Games: Mockingjay - Part 1” earned about $755 million worldwide.
(The company will hold a conference call with analysts on Tuesday at 9 a.m. New York time. To listen, dial +1-800-230-1059.)