Lions Gate Entertainment: Higher Revenue, Lower Margins
Estimize | May 29, 2014 01:36AM ET
Lions Gate Entertainment Corp. (NYSE:LGF) is set to report FQ4 2014 earnings after the market closes on Thursday, May 29th. Lions Gate Entertainment is a film and television production company that has enjoyed success over the past few years in large part due to blockbuster films in The Hunger Games series and popular original shows including Mad Men and Orange is the New Black. This quarter, Wall Street is expecting LGF to produce 7% more revenue than FQ4 of last year, but with significantly lower profit margins. Wall Street is expecting Lions Gate’s earnings per share to fall from 66c last year to 39c this period. Here’s what investors are expecting from Lions Gate on Thursday afternoon.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for Lions Gate to report 39c EPS and $837.87M revenue while the current Estimize.com consensus from 8 Buy Side and Independent contributing analysts is 42c EPS and $842.97M in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Lions Gate to beat the Wall Street consensus on both the top and bottom line.
Over the previous 5 quarters the consensus from Estimize.com has been more accurate than Wall Street in forecasting Lions Gate’s EPS and revenue 4 times and once respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time.
More importantly it does a better job of representing the market’s actual expectations. It has been confirmed by Deutsche Bank (NYSE:DB) Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. Here we are seeing an average differential between the two groups’ expectations compared to recent quarters.
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The distribution of earnings estimates published by analysts on the Estimize.com platform range from 38c to 50c per share and from $772.70M to $861.23M in revenues. This quarter we’re seeing a wide range of estimates for Lions Gate, especially on revenue.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wide range of estimates signals less agreement in the market, which could mean greater volatility post earnings.
The Wall Street EPS consensus started and ended the quarter at 39c while the Estimize consensus slipped from 43c to 42c. Meanwhile the Wall Street revenue consensus plunged at the end of the quarter from $850.37M to $837.87M while the Estimize consensus also sank before the report from $853.76M to $842.97M. Timeliness is correlated with accuracy and downward analyst estimate revisions going into the report are often a bearish indicator.
The analyst with the highest estimate confidence rating this quarter is turbinecity who projects 41c EPS and $852.59M in revenue. turbinecity was our Winter 2014 season winner and is ranked 2nd overall among over 4,500 contributing analysts. Over the past 2 years turbinecity has been more accurate than Wall Street in forecasting EPS and revenue 60% and 54% of the time respectively throughout a massive 2,706 estimates.
Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case turbinecity expects Lions Gate to beat the Estimize consensus on revenue but miss the EPS consensus by 1c per share.
This quarter the Estimize community is expecting Lions Gate to report revenue $3 million better than last quarter to report the company’s best 3 month period within the past 2 years. However contributing analysts are also expecting earnings to be lower as Lions Gate sinks more money into current productions for hopeful gains in the future. On Thursday the Estimize community is looking for Lions Gate to beat the Wall Street consensus by 3c per share on earnings and $5 million in revenue.
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