Lions Gate Entertainment Closing In On Top 6 Studios And Increasing International Returns

| About: Lions Gate (LGF.A)

Over the weekend "Twilight: Breaking Dawn Part 2", the closing film in the Twilight franchise, made $141.3 million domestically and $199.6 million in international markets. Both of these numbers bode well for Lions Gate Entertainment (LGF), the company that acquired Summit Entertainment (the film studio behind the Twilight film saga) last year.

"Breaking Dawn Part 2" is the eighth highest movie opening of all time in North America. The movie now ranks behind "The Avengers", "The Dark Knight Rises", and "The Hunger Games" for the largest opening of 2012. The domestic box office total passed the most recent Twilight movie "Breaking Dawn Part 1", but fell short of the franchise opening record set by "New Moon" with $142.8 million. "Breaking Dawn Part 2" also helped Twilight become the first franchise to have three movies cross the $130 million mark in their first three days.

On Friday, the newly combined Lionsgate/Summit passed $1 billion for the first time in company history. For the year 2012, the small movie studio will actually place ahead of two of the "Big 6 Studios." Here is a look at how the studios performed in 2011:

· 1. Paramount Pictures (NYSE:VIA) 19.3%

· 2. Warner Brothers Pictures (NYSE:TWX) 18.1%

· 3. Columbia Pictures (NYSE:SNE) 13.4%

· 4. Walt Disney Pictures (NYSE:DIS) 12.2%

· 5. Universal Pictures (NASDAQ:CMCSA) 11.3%

· 6. 20th Century Fox (NASDAQ:NWS) 11.1%

The Lions Gate/Summit combined studios will place ahead of 20th Century Fox and Paramount for 2012. The studio's Twilight and Hunger Games franchises are leading the way. The two movies released under those franchise tags had two of the largest openings of 2012, and both rank in the top 10 all time domestically. In 2011, Lions Gate saw box office receipts of $183.4 million, while Summit brought in $415.2 million. The movie industry website The Numbers has a nice breakdown of both Lions Gate and Summit year by year. Last year, a combined company would have brought in $598.6 million -- good enough for a 5.8% share of the market.

I recommended buying shares of Lions Gate at $8, when the studio made the original announcement about the Summit buyout. Lions Gate spent $712.5 million to acquire the company most famous for the teen vampire/werewolf franchise. Many analysts questioned the move, as Summit had only one remaining Twilight movie to be released. However, Summit brought several other properties to Lions Gate, and helps the studio release 22 to 27 movies a year, and more closely compete with the "Big Six Studios."

"Breaking Dawn Part 2" posted strong international results, which helped the movie hit the top 10 for all time international, and worldwide openings. The film opened in 12,812 locations across 61 markets, and posted the highest international box office opening of the year, beating other blockbusters like "The Dark Knight Rises" and "The Avengers". The movie's $199.6 million international opening ranks eighth all time. Strong international contributions pushed the movie's total weekend box office to $340.9 million, which made the movie the eighth highest worldwide opening of all time. The movie was number one in many international markets, and posted impressive double-digit results in many locations:

· United Kingdom: $24.4 million

· Russia: $20.3 million

· Brazil: $19.0 million

· France: $16.4 million

· Australia: $12.7 million

· Italy: $12.4 million

· Spain: $11.8 million

· Mexico: $11.8 million

"Breaking Dawn Part 2" opened in 82 international and domestic IMAX (NYSE:IMAX) locations, and will soon be released in Germany and China as well. The limited IMAX release made $3 million in additional box office revenue.

Shares of Lions Gate trade at $15.37, and are down slightly in Monday's open. I'm not sure what investors were expecting from the last Twilight movie, but the box office results should be sending shares higher and should also bode well for future movie releases in the Hunger Games series.

The "Breaking Dawn Part 2" international total over the weekend actually surpassed the entire international box office of the first "Twilight" movie. "The Hunger Games" made only $278.5 million in international markets, compared to $408 million in the domestic box office. As the Twilight franchise showed, the international box office revenue increases throughout a franchise as audiences get more familiar with the books and characters. Lions Gate scored a blockbuster with the rights to the popular trilogy of Hunger Games books. With three more movies to come from the two remaining books, Lions Gate and its shareholders will see huge international box office results in the future. I recently wrote that it is not too late to invest in Lions Gate for the Hunger Games franchise, despite recent returns.

Analysts on Yahoo Finance expect the company to report earnings per share of $0.28 from $710.33 million in revenue during the current December quarter. In the company's last reported quarter, Lions Gate blew away analysts' predicted $0.09 estimated earnings per share. Lions Gate reported $0.53 per share, with strong sales from "The Hunger Games" on DVD, and several movies in theaters.

Recently, I recommended buying shares of Lions Gate under $16. The company's upcoming movies, including the second movie in the Hunger Games franchise, "Catching Fire", should produce strong returns for patient shareholders. Look to buy dips on this company that has already seen shares double in 2012.

Disclosure: I am long LGF, IMAX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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