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21st Century Fox (FOXA) Q2 Earnings & Sales Beat Estimates

Zacks

Twenty-First Century Fox, Inc. FOXA delivered better-than-expected earnings for the seventh straight quarter, when it reported second-quarter fiscal 2018 results. The company’s adjusted earnings from continuing operations came in at 42 cents, beating the Zacks Consensus Estimate of 36 cents. However, earnings declined 20.8% year over year.

Including one-time items, earnings came in at 99 cents a share compared with 46 cents reported in the prior-year quarter.

Notably, the top line not only increased 5% year over year but also surpassed the Zacks Consensus Estimate for the third straight quarter. Revenues of $8,037 million came ahead of the consensus mark of $7,968 million on account of robust affiliate and advertising revenues at the Cable Network Programming, marginally offset by decline in revenues at Television segment. It was also aided by increase in syndication revenues at the Cable Network Programming.

Following better-than-expected results, the company’s shares gained 1.5% during after-hour trading session on Feb 7. In the past six months, the stock has gained 29.2%, outperforming the industry’s growth of 25.9%.

Segment wise, Cable Network Programming revenues jumped 11% to $4,405 million on the back of robust affiliate as well as advertising revenue growth, which overshadowed 15% gain in costs. Rise in expenses was primarily due to higher global sports programming costs.

Filmed Entertainment revenues were down 1% to $2,246 million, while Television segment net revenues decreased 5.8% to $1,806 million, both on a year-over-year basis.

The company’s total segment operating income before depreciation and amortization (OIBDA) came in at $1,438 million, down 27.9% year over year. Increase in OBIDA from Cable Network Programming was negated by decline in OIBDA from Television, Film Entertainment and Other, Corporate and Eliminations.

Twenty-First Century Fox, Inc. Price, Consensus and EPS Surprise

Twenty-First Century Fox, Inc. Price, Consensus and EPS Surprise | Twenty-First Century Fox, Inc. Quote


Detailed Discussion

OIBDA at Cable Network Programming rose 2.6% to $1,365 million owing to 11% increase in revenues. The increase was partially offset by 15% rise in expenses on account of increase in global sports programming costs.

OIBDA contribution from domestic rose 1% year over year due to increase in contribution form Fox News, which mitigated dismal performance at domestic sports networks as well as National Geographic. At the domestic cable channels, affiliate revenues grew 12% owing to rise in contractual rate across all domestic brands. Domestic advertising revenues declined 3% year over year primarily due to fall in general entertainment ratings.

OIBDA contribution from International cable channels jumped 8% year over year as strong performance at FNG International and STAR entertainment networks overshadowed decline at STAR sports networks. Affiliate revenues advanced 13% owing to increase in rates and subscribers growth at both FNG International as well as STAR India. International advertising revenues rose 14% primarily owing to high-double digit advertising growth at STAR India and improvement at FNG International.

Filmed Entertainment’s OIBDA slumped 66% to $131 million on account of higher theatrical releasing costs.

Television segment’s OIBDA plunged 85% to $56 million on account of increase in contractual sports programming costs at the FOX Broadcast Network and lower revenues.

Other Financial Details

Twenty-First Century Fox ended the quarter with cash and cash equivalents of $5,809 million. Total borrowings came in at $19,163 million and shareholders’ equity, excluding non-controlling interest of $1,242 million, was $18,389 million.

Other Developments

Twenty-First Century Fox has agreed to sell some of its properties to The Walt Disney Company DIS for about $52.4 billion in stock. This will include 21st Century Fox’s Twentieth Century Fox Film and Television studios, as well as cable and international TV businesses. For the rest, 21st Century Fox made clear that it will spin-off into a newly listed company — “Fox” including its highly-rated news, sports and broadcast businesses, just before the acquisition.

The merger has been approved by the board of directors of both companies, while shareholder approval of these companies still remains pending. Further, it is conditioned up on receiving approval under the Hart-Scott-Rodino Antitrust Improvements Act, numerous other non-United States merger and other regulatory reviews, as well as customer closing conditions.

Zacks Rank & Stocks to Consider

Twenty-First Century Fox carries a Zacks Rank #3 (Hold). Better-ranked stocks are Time Warner Inc. TWX and The New York Times Company NYT, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Time Warner has an impressive long-term earnings growth rate of 10.2%.

The New York Times delivered better-than-expected earnings in the trailing four quarters.

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