MOVIE STUDIO’S SHARES TUMBLE
Investors are rattled as Lionsgate reports disappointing earnings after ‘ Hunger Games.’
Lionsgate shares plummeted Friday after the movie and television studio reported worse- than- expected third- quarter earnings, due partly to disappointing profit from the f inal “Hunger Games” movie.
The Santa Monica entertainment company’s shares fell $ 6.92, or 27%, to $ 18.53 in trading on Wall Street, its steepest decline since the company went public in 1998, according to FactSet.
Investors were rattled by the company’s latest f inancial results. Lionsgate on Thursday said its adjusted profit was $ 40.7 million for the three months ending Dec. 31, down nearly 60% from the same quarter a year ago, due to lower f ilm revenue. Total sales for the company fell 10% to $ 670 million during the quarter.
The company’s stock has declined significantly since “The Hunger Games: Mocking jay — Part 2” hit theaters last fall and fell short of expectations. In a conference call with analysts, Lionsgate Chief Executive Jon Feltheimer indicated that the relatively weak performance of “Mocking jay — Part 2” could lower profits through 2017.
“Although ‘ Mockingjay 2’ grossed $ 650 million at the worldwide box office, its domestic performance fell short of our expectations,” Feltheimer said. He said the f ilm was “underperforming profit margins by over $ 100 million” and had been hurt by the dominance of Walt Disney Co.’ s “Star Wars: The Force Awakens.”
“Mocking jay — Part 2,” starring Jennifer Lawrence as the young- adult sci- f i hero Katniss Everdeen, grossed $ 281 million in ticket sales from the U. S. and Canada, 17% less than the previous installment.
Overall motion picture revenue was $ 506 million in the quarter, down from $ 590 million the year before. Profits from movies were squeezed by the costs of releasing four major theatrical movies during the quarter, compared with just two a year ago.
However, Lionsgate’s television business, which makes shows such as “Orange is the New Black” for Netf lix, continued to show signs of growth in the quarter. TV production revenue increased slightly to about $ 165 million, and the company said shows such as “Orange is the New Black” and ABC’s “Nashville” should drive stronger growth during the fourth quarter.
J. P. Morgan analyst Alexia Quadrani, in a note to clients, said the stock sell- off was an overreaction, given the increases in the TV business.
Lionsgate’s stock slide came amid broader market declines after a report showed the U. S. job creation slowed in January. The Dow Jones industrial average fell 1.3%, while the Standard & Poor’s 500 index lost 1.9%.
The stock declines for Lionsgate also ref lected mixed investor reactions to the studio’s disclosure that it is considering a merger with the premium cable channel Starz. In a regulatory f iling, Starz said the “Hunger Games” studio “intends to explore whether there is a potential mutually beneficial combination of the two companies.”
Media mogul John Malone a year ago acquired a minority stake in Lionsgate through a stock swap with Starz, which Malone also backs.
The f iling suggests that the discussions are in early stages and that a deal is not certain to happen, but the companies are exploring a number of different deals that could benefit shareholders of both firms.
Starz’s stock followed Lionsgate’s, falling $ 6.93, or 22%, to $ 24.30.