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MGM shocks Street with unexpected loss

Mar 4, 2002  •  Post A Comment

Just when MGM had Wall Street moving into its corner, it dropped a bombshell last week.
MGM warned that it now expects to break even in 2002, instead of growing earnings 15 percent as it announced last month, due primarily to the weak performance of several theatrical films, including “Hart’s War” and “Rollerball.”
MGM said it now expects a first-quarter net loss of 35 cents to 37 cents per share and a full year net loss of 46 cents to 48 cents per share.
“We remain confident in the balance of our 2002 film slate, and our other core businesses continue to exceed our expectations,” said Dan Taylor, MGM senior executive VP and chief financial officer.
Analysts, many of which lowered their 12-month price targets and earnings forecasts on MGM, said the news was a blow for the studio that has been considered a prime merger and acquisition candidate largely because of its rebounding financials. NBC, USA Networks, The Walt Disney Co. and others have expressed interest.
MGM put itself on the sale block late last year, saying it needs to be part of a larger media structure with far-reaching distribution for its library content.
MGM management recently hinted it might use some of its cash flow to acquire a larger stake in the Rainbow Media Group or other assets outright.