June 2, 2008 / 4:15 PM / in 9 years

UPDATE 2-Lions Gate shares drop after earnings miss

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By Gina Keating

LOS ANGELES, June 2 (Reuters) - Shares of Lions Gate Entertainment Corp LGF.N slid 9 percent on Monday after the independent film and television production company missed Wall Street’s quarterly earnings target.

The company posted quarterly results on Friday, and on Monday it declined to forecast earnings before interest, taxes, depreciation and amortization, or EBITDA.

But Lions Gate Chief Executive Jon Feltheimer forecast fiscal year 2009 revenue of $1.5 billion and free cash flow in excess of $100 million and said it would “swing toward positive” EBITDA from a loss last year of $56.2 million.

“We’ve just added two or three pictures, and just like last year when we added ‘Rambo’ towards the end of the year, it certainly moved our earnings; so I think we won’t be doing that (giving a precise EBITDA outlook) at this time,” Feltheimer said.

Analysts have been expecting fiscal 2009 EBITDA of $62.2 million and revenue of $1.37 billion, according to Reuters Estimates.

“The trend line is improving,” JP Morgan analyst Barton Crockett said on Monday. “Revenue and free cash flow, the way they define it, is relatively stable. Earnings have gone down, but they are suggesting that we will see a rebound in 2009.”

SMH Capital analyst David Miller, who described the results as “stellar” on the company’s conference call, said Lions Gate’s shares typically tumble after its year-end results.

“This stock continues to be the most misunderstood public media company on the planet,” Miller said. “The stock always takes a hit on the fourth-quarter call regardless of what they report.”

The company on Friday posted net earnings for the fourth quarter ended March 31 of 22 cents per share -- missing analysts’ expectations by 15 cents per share -- and revenue of $511.5 million.

Feltheimer said quarterly earnings were dragged down by marketing expenses from Debmar-Mercury, the company’s television syndication arm, and from the film “Rambo,” a late addition to the fourth-quarter theatrical slate.

Both Debmar-Mercury and “Rambo,” which grossed $106.7 million worldwide, should make significant positive contributions to earnings in fiscal 2009, he said.

Lions Gate also expects to see benefits from its partnership in Mandate Pictures, which released the independent film blockbuster “Juno” last year.

The company’s plans to leave its lucrative pay TV deal with CBS Corp’s (CBS.N) Showtime and launch a premium TV and movie channel have left a question mark over its results going forward, Crockett said.

Feltheimer on Monday declined to discuss distribution plans for the channel, which launches in October in partnership with Viacom Inc VIAb.N and Metro-Goldwyn-Mayer, but said: ”We are extremely confident that it would “have tremendous distribution going forward.”

“The key is to show there are some cable systems and (direct broadcast satellite) systems that want to carry this network and show a road to profitability in a way that is credible,” Crockett said. “I think people are in a wait-and-see mode to see if they get distribution for this pay TV network.”

The company also said its board increased its potential for share buybacks to $100 million from a previous authorization for $50 million.

Shares of Lions Gate were down 9.4 percent, or $1.00, at $9.65 on the New York Stock Exchange in midday trading. (Editing by Phil Berlowitz and Gerald E. McCormick)

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