A prudent investment decision to offload a weak performing stock at the right time can help in maximizing your portfolio’s return. Let’s find out why movie stocks like Twenty-First Century Fox, Inc. (FOXA Quick QuoteFOXA - Free Report) and Lions Gate Entertainment Corp. have fallen out of favor with investors.

Per Box Office Mojo, May 2016 box office collections plunged 27.3% to $859.5 million. Adding to the woes is the bearish second-quarter 2016 box office outlook. Analysts expect box office collection in 2016 to decline year over year.

In the past one year, shares of Lions Gate have plummeted nearly 42%, while Twenty-First Century Fox is down roughly 12%.

Time to Dump Lions Gate Stock?

The motion picture industry is highly competitive. Hence, companies like Lions Gate have to continually strive to maintain its share of box office receipts. This is because if the other players release a significant number of motion pictures, Lions Gate runs the risk of witnessing a decline in its share of box office receipts. Moreover, a limited supply of motion picture screens also makes matters difficult for the company.

Lions Gate’s Gods of Egypt, which was released in this February, was the first major flop of 2016. The movie made on a budget of $140 million managed to collect only $142.2 million worldwide. Further analysts estimate a year-over-year decline in Lions Gate’s earnings from movies in 2016.

Let’s look at the Zacks Rank #4 (Sell) company’s earnings estimate revisions to get a clearer picture of analysts’ views about the stocky. In the past 60 days, the company’s earnings estimates for fiscal 2017 and fiscal 2018 have plunged by 64.7% and 51.4% to 36 cents and 69 cents, respectively. On the other hand, its earnings estimates for the first quarter of fiscal 2017 has been revised to a loss of 20 cents from a profit of 45 cents, over the same time frame,.

Lions Gate’s earnings history too is disappointing with the company missing the Zacks Consensus Estimate in three quarters of the last five quarters.

Reasons to Avoid Twenty-First Century Fox

The company’s international Cable and Film operations continue to be negatively impacted by the foreign currency exchange rate. In Aug 2015, management had guided that the foreign currency exchange rate will negatively impact the company’s growth rate by 3% or nearly $200 million in fiscal 2016 based on the exchange rate at that time.

The company expects fiscal 2016 foreign currency impact to be nearly $350 million or 6% on its EBITDA growth. Given this, management expects adjusted EBITDA for fiscal 2016 in the range of flat to low-single-digit increase as against the previous growth estimate in the mid-single-digit range.

On the other hand, the company has an enviable list of film releases for fiscal 2016 including the likes of Independence Day 2 and Ice Age 5. The release schedule is such that the studio will be incurring significant charges for theatrical releases in the current fiscal but the benefit on EBITDA will be reflected in fiscal 2017.

Following Twenty-First Century Fox cautious outlook, the Zacks Consensus Estimate was revised downward. Analysts polled by Zacks are convinced that this Zacks Rank #4 (Sell) stock will underperform in the future. Over the past 60 days, the Zacks Consensus Estimate for fiscal 2016 and 2017 has moved down by 2.9% and 3.7% to $1.66 and $2.08, respectively. The Zacks Consensus estimate for the fiscal fourth quarter has also declined by 6 cents to 38 cents.

Therefore, we believe that it might be a better idea to shift your focus from these two stocks for the time being or until the Zacks Rank and estimates improve.

Some better-ranked stocks that warrant a look include Cablevision Systems Corporation and MSG Networks Inc. . Cablevision sports a Zacks Rank #1 (Strong Buy) while MSG Networks holds a Zacks Rank #2 (Buy).

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