On Aug 22, 2014, we issued an updated research report on
Twenty-First Century Fox, Inc.
) following the company's fourth-quarter fiscal 2014 results.
The company's adjusted earnings of 42 cents per share topped the
Zacks Consensus Estimate of 38 cents, rising nearly 35.5% year over
year. Moreover, the media conglomerate reported a 17%
year-over-year increase in total revenue to $8,424 million, which
was way ahead of the Zacks Consensus Estimate of $8,011 million.
Fantastic box-office response to its movies and a continuous rise
in affiliate fees helped 21st Century Fox to close fiscal 2014 on a
Affiliate fees have portrayed a rising trend in the last couple of
years. A dominant source of revenue for Cable Network Programming
segment, Affiliate fees are a major contributor to the total
revenue. In fiscal 2014, affiliate fees contributed 28.2% to total
revenues; in fiscal 2013 it represented 28% of the total revenue;
and in fiscal 2012 and 2011 it contributed 25% and 22%,
Following robust quarterly performance, management provided an
upbeat outlook for Cable Network Programming, Filmed Entertainment
and Television segments, thereby raising total EBITDA expectations
for fiscal 2015. In fiscal 2015, EBITDA is expected to grow in the
high single-digit range over the $6.29-billion base of fiscal 2014.
Cable segment will lead the way with high single to low
double-digit EBITDA growth in fiscal 2015.
In addition, after publicly abandoning its Time Warner Inc. (
) bid and denying any other potential near-term acquisitions,
Twenty-First Century Fox stated that maximizing shareholder returns
is its top priority. In Aug 2014, the company approved a new share
buyback program worth $6 billion to be executed over a 12-month
time frame, underscoring the company's priority to maximize
shareholders' gain. This replaces the earlier $4-billion share
buyback plan announced in Aug 2013.
However, expenses are set to rise at Twenty First Century Fox,
given the higher programming costs (MLB, NASCAR, and Cricket World
Cup), along with consolidation of YES Network. At the same time,
currency fluctuations (mostly from Latin American countries) will
remain a drag.
Currently, Twenty-First Century Fox carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Other better-ranked stocks in the same sector include The Walt
Disney Company (
) and Lions Gate Entertainment Corp. (
). Both carry a Zacks Rank #2 (Buy).
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