Lions Gate Entertainment Corp. LGF, producer and distributor of motion pictures for theatrical and straight-to-video release, is expected to report second-quarter fiscal 2016 results on Nov 9. Last quarter, it posted a positive earnings surprise of 160%. Let’s see how things are shaping up for this announcement.
Factors Influencing the Quarter
The company’s Television segment looks strong and its efforts to expand online are admirable. In the first quarter, Television Production revenues soared 13.7% to $133.6 million, largely on the back of significant rise in international and home entertainment revenues.
However, 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 suffice to offset the cost of production. Moreover, intensifying currency headwinds might weigh on the company’s performance.
Earnings Whispers
Our proven model does not conclusively show that Lions Gate Entertainment is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: ESP for Lions Gate Entertainment is -66.67%. This is because the Most Accurate estimate of 1 cent is lower than the Zacks Consensus Estimate of 3 cents.
Zacks Rank: Lions Gate Entertainment carries a Zacks Rank #2 (Buy). Though a Zacks Rank #2 increases the predictive power of ESP, the company’s ESP of -66.67% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:
Information Services Group, Inc. III has an Earnings ESP of +60.00% and a Zacks Rank #3 (Hold).
National CineMedia, Inc. NCMI has an Earnings ESP of +7.14% and a Zacks Rank #3.
Dean Foods Co. DF has an Earnings ESP of +4.00% and a Zacks Rank #3.
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