The market expects Lions Gate Entertainment (LGF.A) to report a year-over-year profit increase on higher sales when it reports results for the quarter ending September 2023. This widely known consensus outlook is important in assessing the company’s earnings performance, but an important factor that could affect the near-term share price is comparing actual results to these estimates.
The stock could rise if these key numbers beat expectations in its upcoming earnings report, which is expected to be released on November 9th. On the other hand, if they are missing, the stock could fall.
While the sustainability of the immediate price change and future earnings expectations will depend primarily on management’s discussion of business conditions at the earnings release, it is worth limiting the likelihood of a positive EPS surprise.
Zacks Consensus Estimate
This film producer and distributor is expected to report a quarterly loss of $0.03 per share in its upcoming report, representing a year-over-year change of +75%.
Revenue is expected to be $989.97 million, up 13.1% from the year-ago quarter.
Estimation of the revision trend
The consensus EPS estimate for the quarter has been revised upward by 3.76% over the past 30 days and is now at current levels. This essentially reflects the way the covering analysts have collectively reassessed their initial estimates over this period.
Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by individual analysts.
Merit whispers
Estimate revisions prior to a company’s earnings release provide an indication of business conditions for the period in which the results are reported. These insights form the core of our proprietary surprise prediction model – the Zacks Earnings ESP (Expected Surprise Prediction).
The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The most accurate estimate is a more recent version of the Zacks Consensus EPS estimate. The idea is that analysts who revise their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others who contributed to the consensus had previously predicted.
Thus, a positive or negative Earnings ESP value theoretically indicates the likely deviation of actual earnings from the consensus estimate. However, the predictive power of the model is only significant for positive ESP values.
A positive Earnings ESP is a strong indicator of earnings growth, especially when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP.
Please note that a negative Earnings ESP value is not an indication of a loss of profit. Our research shows that stocks with negative Earnings ESP values and/or a Zacks Rank of 4 (Sell) or 5 (Strong Sell) are difficult to predict an earnings beat with any degree of certainty.
How have the numbers developed for Lions Gate?
For Lions Gate, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become more optimistic about the company’s earnings outlook. This resulted in an ESP of +700%.
On the other hand, the stock currently has a Zacks Rank of #3.
So this combination suggests that Lions Gate will most likely beat the consensus EPS estimate.
Does the history of earnings surprises provide any clues?
Analysts often consider the extent to which a company has been able to meet consensus estimates in the past while calculating their estimates for their future earnings. So it’s worth taking a look at the surprise story to assess its influence on the coming number.
For the most recently reported quarter, Lions Gate was expected to report a loss of $0.24 per share when it actually produced a loss of $0.04, delivering a surprise of +83.33%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times.
Bottom line
Above- or below-average earnings may not be the sole basis for a stock to rise or fall. Many stocks end up losing ground despite a decline in earnings due to other factors that disappoint investors. Similarly, unforeseen catalysts are helping a number of stocks rise despite a lack of earnings.
However, betting on stocks that are expected to beat earnings expectations increases the chances of success. For this reason, it’s worth checking a company’s Earnings ESP and Zacks Rank before its quarterly release. Be sure to use our Earnings ESP filter to find the best stocks to buy or sell before they are reported.
Lions Gate appears to be a compelling candidate for earnings growth. However, investors should also consider other factors to bet on this stock or stay away from it before its earnings release.
Stay on top of upcoming earnings releases with the Zacks Earnings Calendar.
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