Lions Gate Entertainment Corp. (LGF) recently reported mixed fourth-quarter 2011 results. The company posted quarterly earnings of 33 cents a share, a noticeable recovery from a loss of 19 cents a share in the prior-year quarter. The analysts covered by Zacks had expected Lions Gate to deliver earnings of 17 cents a share.

Sturdy cable VOD performance, robust international and digital sales, remarkable jump in equity interest income and abridged theatrical marketing costs helped the company to break its loss series and enter into profit after registering losses in the past three consecutive quarters for the current fiscal year.

However, total revenue for the quarter contracted by 6.2% year over year to $376.9 million falling behind the Zacks Consensus Revenue Estimate of $408 million.

Moving to the annual results, Lions Gate posted a loss of 41 cents in fiscal 2011 compared with a loss of 17 cents delivered in the prior year. However, the bottom-line result was better than the Zacks Consensus Loss Estimate of 61 cents.

On the revenue front, Lions Gate reported total revenue of $1,582.7 million, up 6.3% from the prior year. However, the reported revenue fell short of the Zacks Consensus Revenue Estimate of $1,607.0 million.

Segment wise, Motion Pictures’ revenue of $1.23 billion climbed 10.0% from the prior year. Within Motion Pictures, revenues increased across Theatrical (up 48.0% to $205.9 million), International Film (up 72.0% to $126.5 million), Lions Gate UK (up 7.0% to $79.2 million) and Television (up 3.0% to $139.8 million), offset partly by Mandate Pictures (down 61.0% to $38.7 million).

Television Production revenue inched up 1.0% year over year to $353.2 million, reflecting a 48.0% increase in domestic series licensing revenue from the television distribution and syndication business. However, domestic series licensing from Lions Gate Television decreased 5.0% year over year.

Home Entertainment revenue for both the motion pictures and the television came in at $690.0 million in fiscal 2011, reflecting an increase of 5.0% from the prior year.

Lions Gate recorded an adjusted EBITDA of $106.5 million in fiscal 2011, below the adjusted EBITDA of $128.4 million recorded last year. The company generated a free cash flow of $9.7 million during the year compared with a negative free cash flow of $102.4 million in the prior year.

Adjusted EBITDA in the fourth quarter of 2011 was $65.7 million compared with $30.5 million in the prior-year period.  During the reported quarter, the company generated a free cash flow of $167.6 million, reflecting a drastic jump from a negative free cash flow of $16.7 million reported in the prior-year quarter.

Lions Gate ended the fiscal year with cash and cash equivalents of $86.4 million with film obligations and production loans of $327.4 million and shareholders’ equity of $127.5 million.  

Lions Gate is a film studio engaged in the production and distribution of motion pictures for theater and straight-to-video release and also television programming for cable and broadcast networks. The company has a strong track record of producing small and mid-budget specialty films.

To grab its share of box office receipts, Lions Gate competes with other major studios such as Fox Entertainment Group, Paramount Motion Pictures Group and Time Warner Inc. (TWX).

Currently, we have a long-term ‘Neutral’ recommendation on the stock. Moreover, Lions Gate holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.

 
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