Fox Posts Strong Q1 Results On Back Of Fox News Ratings, Box Office Success

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21st Century Fox (NYSE:FOX) announced solid first quarter results as both its revenue and earnings per share came in ahead of expectations. The media company’s overall revenue increased 7% year-over-year (y-0-y) to $6.5 billion, driven by strong revenue growth at the company’s cable network and film segment. In addition, Fox’s total segment earnings before interest, taxes, depreciation, and amortization (EBITDA) grew to $1.79 billion, a 17% y-o-y increase from the prior year. From a bottom line perspective, the company reported adjusted income of $942 million, up 25% y-o-y, along with adjusted earnings of $0.51 per share, which increased 34% y-o-y.

While Fox’s cable networks performed well in the September quarter, amid higher ratings at Fox News, the company’s basic television network reported a 1% y-o-y revenue decline due to lower advertising income. This decline was largely due to a market shift of advertising dollars toward the Summer Olympics. Fox News ended Q3 as cable’s top network in prime-time. Fox Sports 1 (FS1) also saw a massive ratings uptick. While the company’s movie studio benefited from the box-office success of its movies in the first quarter, lower home entertainment sales led to a decline in its segment revenues.

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Cable Networks Boosted Q1 Results

Fox News has been the highlight for the company amidst an intense election season this quarter. Fox News was the most-watched basic cable network during the September quarter, and delivered y-o-y improvement in the key age 25-54 demographic. [1]

Fox’s cable networks revenue grew 10% y-o-y on solid gains in both affiliates and advertising revenues, both domestically and internationally. In the first quarter, Cable network’s domestic affiliate fee revenue increased primarily due to higher average rates per subscriber led by the FX Networks and Fox News, partially offset by lower average subscribers. Also contributing to the increase was FS1 due to higher average rates per subscriber and higher average subscribers. On the other hand, domestic advertising revenue increased primarily due to higher pricing and ratings at Fox News. The increase in domestic content and other revenue was primarily due to the effect of the National Geographic acquisition.

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Strong Quarter For Studio Operations

Fox’s revenue at the Filmed Entertainment segment increased 7% y-o-y to 1.9 billion, primarily due to higher SVOD revenue from television productions, led by the licensing of Homeland to Hulu. Moreover, the company’s higher worldwide theatrical revenues were partially offset by lower home entertainment revenue from motion picture productions. Key fim releases during the quarter included Ice Age: Collision Course, Independence Day: Resurgence and X-Men: Apocalypse.

 

Future Outlook

Reuters’ compiled analyst estimates forecast revenues of $7.8 billion and earnings of $0.48 per share for Q2 2017, implying growth of about 6% and 9%, respectively. The company expects its effective tax rate for the full year to be closer in the low to mid 30% range.

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Notes:
  1. Q3 2016 Ratings: Fox News Is Most-Watched Cable Network, adweek.com, Sept 2016 []