Lions Gate Entertainment (LGF): What’s Up for Q2 Earnings?

Lions Gate Entertainment Corp. LGF, a producer and distributor of motion pictures for theatrical and straight-to-video release, is expected to report second-quarter fiscal 2017 results on Nov 3, after the closing bell.

Last quarter, the company posted a positive earnings surprise of 139.1%. Notably, the company has missed the Zacks Consensus Estimate in two of the last four quarters. Let’s see how things are shaping up for this announcement.

Zacks Model Shows Unlikely Earnings Beat

Our proven model does not conclusively show that Lions Gate Entertainment is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Lions Gate Entertainment has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 25 cents.

The company carries a Zacks Rank #4 (Sell), which when combined with ESP of 0.00%, makes a surprise unlikely. Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Factors Influencing the Quarter

Lions Gate’s Television segment looks strong and its efforts to expand online are commendable. In the first quarter, Television Production revenues climbed 43.1% to $191.1 million, largely on the strength of domestic revenues that soared 159.4% to $153 million.

However, “Blair Witch,” released in September, did not live up to the market expectations. “Blair Witch” is a direct sequel to “The Blair Witch Project” which was released in 1999 and is considered to be one of the most successful horror movies of all time. “The Blair Witch Project” which was made at a budget of just $60,000, collected nearly $250 million worldwide.

The escalating cost of motion picture production and marketing in recent years may jeopardize Lions Gate’s margins. The continuation of this trend will leave no other option for the company but to depend more on lower revenue generating alternatives such as home video and television, which may not be sufficient to offset the cost of production. Moreover, intensifying currency headwinds might weigh on the company’s performance.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Nexstar Broadcasting Group, Inc. NXST has an Earnings ESP of +12.64% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Starz STRZA has an Earnings ESP of +19.23% and a Zacks Rank #3.

Time Warner Inc. TWX has an Earnings ESP of +0.74% and a Zacks Rank #3.

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