Shares of Lions Gate Entertainment (LGF) took a beating in after hours trading Wednesday. The company reported its fourth quarter earnings, which fell below analysts' expectations. Back in March, I showcased the many positive things Lions Gate has going for it, aside from The Hunger Games. It appears now with the loss, many short term holders of the stock are heading for the exits, expecting to profit once again from the blockbuster film.
Revenue for the fourth quarter was a reported $645.2 million. This is a sharp increase from last year's reported $376.92 in the prior year's ending quarter. The increase is led mainly from the success of The Hunger Games. The company reported a net loss of $22.7 million, which translated to a loss of $0.17 per share for the quarter. Last year in the same period, Lions Gate reported earnings per share of $0.34.
Analysts on Yahoo Finance had been predicting $0.25 earnings per share for the quarter. The large decrease in profit was blamed on the acquisition of Summit Entertainment and a large marketing effort for The Hunger Games. According to Bloomberg, the profit was lowered by $38 million because of the Summit acquisition.
The Hunger Games was launched on March 23rd of this year. The reported quarter ended on March 31st for Lions Gate. The company's first quarter will include the majority of the blockbuster movie's box office earnings. In the United States, The Hunger Games premiered with $153 million in its opening weekend. Through March, the movie grossed $233 million in America.The movie has gone on to gross $396 million in the United States.
The Hunger Games remains in over 1,400 theaters, as of this past weekend. The movie is approaching the $400 million domestic mark and should hit that figure after this weekend. The movie continues to earn money overseas and will be entering the Chinese market soon. In June, The Hunger Games will premiere on 67 IMAX (NYSE:IMAX) screens in the most populated nation. The number of total screens in China has not been announced. The entry into China should significantly increase the company's second quarter earnings, currently expected at $0.24 (Yahoo Finance).
During the company's fourth quarter, revenue was also earned from the DVD release of Breaking Dawn: Part 1, and television and library revenue. Lions Gate announced that it has reached the $1 billion amount for its television backlog, from movies set to be shown on television in the future. Television revenue increased from the success of "Mad Men" and "Weeds." "Mad Men" was shown on the Netflix (NASDAQ:NFLX) streaming service. The streaming has been believed to help AMC (NASDAQ:AMCX) hit higher viewership during this year's fifth season. Three and a half million people tuned in for the premiere of Mad Men earlier this year.
In fiscal 2012, Lions Gate Entertainment had revenue of $1.59 billion. The company reported a net loss of $39.1 million for the year. Television revenue for the fiscal year was $397 million, a record for Lions Gate. Film revenue increased to $416 million, an increase of 11% from fiscal 2011. The company reported a net loss of $0.30 per share for the fiscal year, versus a net loss of $0.23 in the prior year.
Lions Gate Entertainment has a solid 2012 and 2013 ahead of it with some huge upcoming releases. In November, the company will launch the last movie in the Twilight Saga. The fourth and final movie Breaking Dawn: Part 2 could be the biggest movie in terms of box office for the film company. November of 2013 will be one of Lions Gate's busiest ever with the release of Catching Fire, the sequel to The Hunger Games. That same month will also see the release of Ender's Game, a joint venture with Digital Domain Media Group (DDMG). I have wrote about the potential of Ender's Game recently, including this piece on Digital Domain Media Group. The movie was recently delayed and will now be released in November. Lions Gate will advertise and market for both movies together, potentially leading to a bigger opening. Here's hoping the movies competing against each other doesn't hurt overall box office performance.
Lions Gate Entertainment remains a winning stock for 2012. Even after the after hours tumble to $12.00, shares are up 42% for calendar 2012. Analysts are expecting Lions Gate to report earnings per share of $1.32 in fiscal 2013. I believe this number will be guided higher or end up higher after the second quarter report. I recommended shares of Lions Gate back in August of 2011 with the appropriately titled "New Movie Franchise Has the Potential to Transform Lions Gate Films." Back in January, I got behind shares of Lions Gate when it was trading at $9.14. I have a price target of $20 in 2012 for Lions Gate films and a long term price target of $30 by the time Mockingjay, the last movie in The Hunger Games franchise, is released in theaters. Tomorrow will clearly represent a nice buying opportunity for long-term buyers.
Disclosure: I am long LGF, DDMG, IMAX.