Sifting Through Lions Gate's One-Time Expense Items Reveals Pretty Solid Q3

David Miller of Loop Capital maintains his Buy rating on Lions Gate Entertainment Corporation LGF, saying the media firm posted a solid results excluding a ton of one-time items.

The third-quarter results of Lions Gate were weighed down by number of one-time items, including a $52 million restructuring charge, $27 million of transaction costs related to the closure of the Starz deal and a $28 million debt extinguishment charge.

Digging Beyond One-Time Items

Stripping off one-time items, the third-quarter adjusted EBITDA and EPS were well ahead of consensus forecasts.

However, Lions Gate’s third-quarter cumulative revenues as a stand-alone entity came in at $669 million, short of Miller’s estimate of $675 million on lower theatrical rentals from "Hacksaw Ridge."

“Inclusive of three weeks' worth of Starz-related revenues, FQ3 revenues were $752.0 million. Consensus revenues on FactSet were $725.3 million,” Miller wrote in a note.

Further, Miller expects a potential sale of EPIX could generate proceeds of $450 million–$600 million. The analyst believes that Lions Gate may sell its 32.1 percent stake in pay channel EPIX given its 100 percent ownership in Starz.

But, Miller said Lions Gate should keep EPIX as its customer as EPIX is a bulk buyer of Lions Gate’s film library and number of original television series.

At last check, shares of Lions Gate Class A shares were up 0.54 percent to $27.85 and Class B shares had risen 1.04 percent to $26.25. Miller has a price target of $31.