When I discussed Lions Gate Entertainment's (LGF) first-quarter results, I noted the disappointing statement of cash flows. Unfortunately, the company didn't do much better in the second quarter. For the six-month period, Lions Gate used over $160 million for operations compared to the roughly $40 million used in the similar frame one year ago.
Of course, cash flow doesn't always get the most coverage. Investors tend to get more excited by a swing to profitability. On that count, Lions Gate scored admirably, earning 26 cents per diluted share versus losing 44 cents per diluted share twelve months prior. Earnings.com indicates that analysts were really underestimating the Q2 income potential here: the call was for 6 cents per share.
This is why shares of the studio were rewarded with a bid in yesterday's after-hours market. At the time writing, Lions Gate was up over 7%.
I can't say I was as pleased with the data as the traders seemed to be. Besides my issue with cash flow, I'll point out that a mere 3% increase in sales doesn't cut it. However, I will concede that Lions Gate has generally done okay with the top line as of late.
Revenues are a tricky thing for a content business to control. Competitors such as Disney (DIS) and General Electric's (GE) NBC Universal have had their share of problems with underperforming film slates. Also, coming to grips with the declining home video industry has been an ongoing struggle.
I don't necessarily see a catalyst for Lions Gate that would help it to break out of the trading range it's been in. For now, I'm going to stay on the sidelines. Cash flow will probably improve over time, but I'll wait for more information on Lions Gate's current slate before undergoing additional due diligence (the performance of the latest Saw sequel certainly isn't going to help the process).
Disclosure: I own Disney, GE; positions can change without notice.