Orange Is The New Black Red Staredown

Kate Mulgrew and Selenis Leyva in the Lionsgate-produced Netflix original, Orange Is the New Black. Credit: Lions Gate Entertainment. 

Shares of Lions Gate Entertainment (NYSE:LGF-A) were down another 2% after hours after falling 5.5% during the regular session, as investors sold on weaker-than-expected fiscal first-quarter revenue. Here's a closer look at the fiscal Q1 totals versus Wall Street's projections:

LGFRevenueYOY GrowthEPSYOY Growth
Consensus estimate  $430.4 million  (4.2%)  $0.12  (64.7%)
Q1 actual  $408.94 million  (8.9%)  $0.31  (8.8%)
DIFFERENCE  $21.46 million  (4.7%)  $0.19  55.9%

Sources: S&P Capital IQ and Lions Gate press release.

Commenting on the results, CEO Jon Feltheimer said in a press release:

We're pleased to report strong financial results with continued robust free cash flow contributing to the strongest balance sheet in the Company's history. We believe that we're exceptionally well positioned to use the depth of our film and television pipelines, our natural advantages as a global content company with few legacy constraints and the strength of our capital structure to continue moving quickly and opportunistically in a dynamic and disruptive industry environment.

What went right: Overall, TV revenue improved 14%, while international sales in the segment soared 73% on licensing revenue from the first three seasons of Orange Is the New Black. Cost controls also paid off. Marketing and distribution expense related to film properties provided for the biggest savings, falling roughly $25 million (26%) year over year. This was not enough to account for the more than $40 million drop in revenue, but enough for Lions Gate to handily beat the Street's bottom-line estimates. 

What went wrong: Revenue from Motion Pictures dropped 17%, to $275.4 million. The good news? Feltheimer is right about Lions Gate's capital position. After accounting for non-cash loan adjustments -- Lions Gate uses production loans to pay for films, and then repays the balance from proceeds -- the studio produced $94.7 million in free cash flow during the quarter. 

What's next: Lions Gate didn't give fiscal second-quarter guidance in its press release. Nevertheless, analysts tracked by S&P Capital IQ have the company generating $534.4 million in revenue, and $0.25 a share in profit after accounting for stock-based compensation and other noncash items. That compares with $552.88 million and $0.23 a share, respectively, in last year's fiscal Q2.

Longer term, analysts have Lions Gate growing earnings by an average of 18.63% annually during the next three to five years. 

In the meantime, investors should pay close attention to the pipeline. Lions Gate has 16 new original TV series slated to be developed this fiscal year to go along with $1.3 billion in contracted revenue for to-be-released films. Lions Gate tends to reduce risk by pre-selling productions in major markets.

Tim Beyers is a Leo with the soul of a kitten. He's also a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission but didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool.

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