Lionsgate Predicts Big Profit Increase, But Stock Still Falls On Earnings Miss

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Lionsgate Sees Future Profit Gains

Lionsgate predicts a 25% increase in profits over the next three years and says not to worry about stock price drop. Deadline's David Lieberman reports.

With its growing array of franchise films and TV series, Lionsgate revenue should increase by 25% over the next three years, while TV revenues increase more than 50% with a profit margin doubling to about 14% in 2017, CEO Jon Feltheimer told analysts this morning. Execs have “greater confidence that we can continue to accelerate” the pace of value creation. And shareholders should benefit: “It’s our intention to increase the dividend on a yearly basis,” Feltheimer said as Lionsgate continues to repurchase shares and make profit-generating acquisitions.

Investors were eager to hear management’s forecast after last night, when Lionsgate released disappointing earnings for the first three months of 2014. Its share price slipped more than 11% after the market opened this morning. The new forecast offers “some suggestion of what investors can expect once the Hunger Games franchise has run its course,” Cowen & Co analyst Doug Creutz says. But Wunderlich Securities’ Matthew Harrigan notes that investors seem to be “reverting to [a] ‘show me’ mode.”

Feltheimer says Lionsgate anticipates $275M in box office revenue from Divergent and as much as $400M for the sequel, Insurgent. It also expects a ramp up in syndication sales from TV shows including Nurse Jackie, Orange Is The New Black and House Of Payne as well as improved margins from first-run programs including The Wendy Williams Show, “which in the beginning was not terrifically profitable.” The revenue mix won’t change dramatically over the next three years, though “TV will have a somewhat larger percentage contribution.”

The CEO says execs were conservative about the contributions expected from Lionsgate’s 31% stake in Epix. But he noted that the channel’s recent launch on Time Warner Cable “has been strong” and became one of its most watched networks during an initial free trial period.

In other news, Motion Picture Group Co-Chairman Rob Friedman confirmed a report that Deadline had in January that Lionsgate has had conversations with Johnny Depp about starring in a movie about Houdini. “We are moving forward on that property,” he said.