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James Li
James Li
Articles (540)  | Author's Website |

Twenty-First Century Fox Falls on Low Operating Income

Company otherwise reports strong revenue growth for fiscal second-quarter 2018 and announces key merger updates

February 07, 2018 | About:

Twenty-First Century Fox Inc. (NASDAQ:FOXA)(NASDAQ:FOX), a major diversified media company, said fiscal second-quarter EBITDA (operating income before depreciation and amortization) declined 28% year over year primarily due to low contributions from the Television and Filmed Entertainment segments.

Brief summary of earnings

Fox Executive Chairmen Rupert and Lachlan Murdoch said that despite challenging revenue comparisons from the Television segment, the company still increased total quarterly revenues by 5% due to higher Cable Network Programming segment revenues, including a 12% growth in domestic affiliate revenues.

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Although Cable Network Programming revenues increased 11% year over year, the associated expenses increased 15% year over year primarily due to higher global sporting costs related to inaugural broadcasts in both Fox Sports 1 and Fox Networks Group International. Operating income in both the Television and Film Marketing segments sharply declined from the prior year: the former suffered from lower National Football League (NFL) and World Series ratings while the latter suffered form high theatrical costs needed to support “a heavier release slate” of films.

Company updates key mergers and acquisitions

Rupert Murdoch announced an agreement with the NFL under which the league will make Fox Sports the home of Thursday Night Football for the next five years. Murdoch noted that since “live sport has never been important than today,” the deal would give one extra night for the company to concentrate the NFL audience on the Fox network. The chairman expects this transaction to increase live sports views, which have outperformed the next competitor by 34%.

For the proposed mergers with Sky PLC (LSE:SKY) and Walt Disney Co. (NYSE:DIS), Murdoch said that the company anticipates the former to close around June 30 and the latter to close in the first six months of 2019.

Company still offers good growth potential despite lower price

Fox traded around $36.06 at market close, about 2% lower than the previous close of $36.80. The stock traded around $36 in after-hours trading.

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Despite low operating income, Fox still has good growth potential as the company has a GuruFocus profitability rank of 9. The company’s operating margin and Greenblatt return on capital are both near a 10-year high and outperform over 88% of global competitors. As the company has higher returns on assets, current ratios and lower leverage year over year, Fox has an excellent Piotroski F-score of 8.

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Disclosure: No positions.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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