Bull of the Day: Lions Gate Entertainment (LGF) - Bull of the Day

By Zacks | Updated August 15, 2014 AAA

The movie making business, though often insanely-profitable, can be very hard to break into for upstart companies. However, Lions Gate Entertainment (LGF) has managed to crack the code and successfully compete with the likes of Disney (DIS), 21st Century Fox (FOX) and others, thanks to its strong lineup of popular movie franchises.

Lions Gate in Focus

LGF is a Santa Monica, California-based company that is probably best known for the Hunger Games film series, though the company also has the distribution and production rights for the Twilight series and Divergent too. Thanks to these successes, LGF has been on an absolute tear over the past few years, as its stock has soared by over 440% in the past half decade, including a 130% gain in the past two years.

However, recent trading has been much less favorable for LGF, as the stock is pretty much flat over the past 52 week period. Still LGF has put up a very strong performance in the trailing three months, and there is plenty of reason to believe that this can continue, especially if we look at recent earnings, and current estimates.

LGF Earnings

For the most recent earnings report, LGF thoroughly crushed estimates, posting EPS of 27 cents a share, compared to an estimate of 13 cents per share. This made up for the previous quarter’s disappointing results, and helped to carry the four quarter average to a positive surprise of 81%.

1408034695_scaled_425.jpg

Investors should note that while the current quarter is looking a little mixed from an earnings perspective, the next quarter and the full year appear to be in great shape. The consensus estimate for both of these periods has been soaring over the past month, including two revisions higher for the next quarter, and four higher for the full year in just the past week.

So clearly, analysts really liked the latest earnings report, and believe that LGF has a great near term future. This is particularly true once we get to the winter season as the next Hunger Games movie is slated to be released then, and it should be a huge boost to LGF, and especially so if it lives up to expectations.

For these reasons, we currently have a Zacks Rank #1 (Strong Buy) on LGF, and expect the company to outperform in the coming months. It is also worth noting that the stock is in a class of its own in the movie/TV industry, as it is the only company of 13 in the space that has a top Rank, and indeed the only one that has a Rank better than a 3 or ‘hold’.

Bottom Line

LGF was an all-star performer following the financial crisis as many of its top movies became very popular. The stock took off as a result and led to huge gains for investors who bought in to the company and their growth story.

The company has seen its shares go through a bit of a consolidation phase recently though, as LGF is pretty much flat over the past year. However, given the strong product pipeline, rising estimates, and top Zacks Rank, now could be the time to jump back in to LGF and ride this stock for the next couple of months as some great fall and winter movies could carry this stock even higher to close out 2014.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
 
Author is long LGF

Related Analysis
  1. Global Markets Not Spooked by Japan - Ahead of Wall Street
    Stock Analysis

    Global Markets Not Spooked by Japan - Ahead of Wall Street

  2. GDP Numbers Bear Out Fed Decision - Ahead of Wall Street
    Stock Analysis

    GDP Numbers Bear Out Fed Decision - Ahead of Wall Street

  3. How A Bank Stress Test Works
    Stock Analysis

    How A Bank Stress Test Works

  4. Will Business Services Thrive on Rising GDP? - Industry Outlook
    Stock Analysis

    Will Business Services Thrive on Rising GDP? - Industry Outlook

  5. Bear of the Day: Wynn Resorts (WYNN) - Bear of the Day
    Stock Analysis

    Bear of the Day: Wynn Resorts (WYNN) - Bear of the Day

Trading Center