Key Takeaways From Fox’s Q2 Earnings

by Trefis Team
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FOX
21st Century Fox
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21st Century Fox (NYSE: FOX) reported better-than-expected fiscal second quarter results, as both its earnings per share and revenues came in ahead of market expectations. In Q2, the company’s overall revenue increased 5% year-over-year (y-0-y) to $8 billion, driven largely by gains at Cable Networks, offsetting declines in the Television and Filmed Entertainment segments. On the cost side, the company’s operating expenses increased 17% y-o-y, primarily due to higher programming rights amortization at the Cable Network Programming and Television segments. Also, the company’s selling, general and administrative expenses increased 9% y-o-y, due to higher compensation expenses. The company’s net income more than doubled to $1.84 billion, largely due to a tax benefit of $1.34 billion taken from the tax reform legislation. In addition, Fox posted adjusted earnings of 42 cents per share, down 21% y-o-y.

We have created an Interactive Dashboard which outlines our forecasts for the company and our expectations for its Q3 earnings. You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation.

Growth In Cable Networks In Q2

In Q2, Fox’s Cable Networks revenues grew 11% y-o-y, and its EBITDA increased 3% over last year. The segment benefited from continued growth in both affiliate and advertising revenues, partially offset by an increase in expenses. Domestic affiliate revenues increased 12% 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 declined 3% y-o-y, due to lower general entertainment ratings. In addition, the segment’s international affiliate revenues grew 13% y-o-y, driven by higher rates and subscribers. Also, international advertising revenue increased 14% y-o-y from high double-digit advertising increases at STAR India.

Fox News remained the most-viewed cable network for all of 2017 in both primetime and total day, its second year in a row on top of the ratings. Fox News viewership remained flat in prime-time, but was up 1% in the ad-friendly adults 25-54 demo compared to 2016.

Our $33 price estimate for Fox’s stock is slightly below the current market price.

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