Key Takeaways From Fox’s Q4 Earnings

21^st Century Fox (NYSE:FOX) reported mixed fiscal fourth quarter results, as its earnings came in ahead of market expectations but revenues missed. The company’s overall revenue increased 2% year-over-year (y-0-y) to $6.7 billion, driven by affiliate revenue growth at the Cable Networks segment. However, this growth in revenues was partially offset by lower content revenues at the Filmed Entertainment segment and flat advertising revenues at the Television segment.

Fox News remained the most-watched cable news network in the June quarter as well. In prime time, the network grew 19% y-o-y in total viewers and 34% y-o-y in the 25-54 year-old demographic. In total day, Fox News grew 27% y-o-y in total viewers and 45% y-o-y in the 25-54 group. ^[1]

On the cost side, the company’s operating expenses increased 2% y-o-y, primarily due to higher programming rights amortization at the Cable Network Programming and Television segments. Moreover, the company’s selling, general and administrative expenses increased 2% y-o-y, due to higher compensation expenses. From a bottom line perspective, Fox posted adjusted earnings of 36 cents per share, down 20% y-o-y, which also beat analysts’ expectations by a cent.

On the Sky acquisition, the transaction has been cleared in all markets except for the U.K., where the process is still underway. Fox’s management remains confident that the deal will be approved, likely in the first half of 2018.

Cable Networks Continues To Grow In Q4

In Q4, Fox’s Cable Networks revenues grew 10% y-o-y, while its EBITDA increased 19% over last year. The segment benefited from continued growth in both affiliate and advertising revenues, partially offset by a 7% y-o-y increase in expenses.

Domestic affiliate revenues increased 10% y-o-y, driven by higher pricing across all of the domestic cable brands, led by Fox News, FS1 and FX Networks. While the domestic advertising revenues grew 6% y-o-y, led by higher ratings and pricing at Fox News and increases at National Geographic. In addition, the segment’s international affiliate revenues grew 9% y-o-y, driven by higher rates and subscribers. Also, international advertising revenue increased 9% y-o-y from high double-digit advertising increases at STAR, led by the broadcast of the ICC Champions Trophy.

Television Results Decline In Q4

In Q4, Fox’s Television revenues declined 4% y-o-y, while its EBITDA fell 5% over last year. The segment was impacted by lower local advertising revenues from lower general entertainment ratings, including a tough comp against the final season of American Idol and a softer local advertising market, partially offset by higher retransmission consent revenues.

Weak Quarter For Studio Operations

Fox’s revenue at the Filmed Entertainment segment declined 12% y-o-y to 1.8 billion, primarily due to a difficult comparison against last year’s worldwide theatrical release of Deadpool and fewer returning television series. Moreover, the segment’s EBITDA declined further, driven by the revenue decreases and higher production amortization and participation costs in the current year due to fewer theatrical releases versus last year. Fox studio grossed close to $386 million in the June quarter at the U.S. box office, led by the release of The Boss Baby and Alien: Covenant.

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1. Fox News is the Most-Watched Cable News Network for 62 Straight Quarters, Adweek, June 2017 [↩]