21st Century Fox Q4 Earnings Top Ests on Superb Movie Biz - Analyst Blog


Fantastic box office response to its movies and a continuous rise in affiliate fees helped Twenty-First Century Fox, Inc. ( FOXA ) to close fiscal 2014 on a high note. Fourth-quarter fiscal 2014 adjusted earnings of 42 cents per share topped the Zacks Consensus Estimate of 38 cents. Moreover, it rose nearly 35.5% year over year leading to a 3.7% rise in stock price in the after-market trading session yesterday.

Including one-time items, earnings came in at 43 cents per share, up by a penny from the prior year quarter.

Full year adjusted earnings came in at $1.55 per share beating the Zacks consensus of $1.53 and up 14% year over year. Including one time items earnings of $1.67 per share declined 42.6%.

Moreover, the media conglomerate reported a 17% year-over-year increase in total revenue to $8,424 million and was way ahead of the Zacks Consensus Estimate of $8,011 million.

Full year revenues of $31,867 million were up 15.1% and comfortably surpassed Zacks Consensus Estimate of $31,305 million.

The rise was due to growth across Cable Network Programming ( up 13.3% to $3,347 million), Direct Broadcast Satellite Television division (up 15.5% to $1,593 million) and Filmed Entertainment (up 37.7% to $2,803 million), partly run down by Television segment (down 5.9% to $1,031million).

The company's total segment operating income before depreciation and amortization (OIBDA) registered 18.7% year over year increase to $1,766 million in the quarter, owing to increased OIBDA at Filmed Entertainment and Cable Network Programming segments, partly offset by declining OIBDA at Television and Direct Broadcast Satellite Television division.

Segment Discussion

OIBDA at Cable Network Programming grew 11% to $1,202 million on the back of affiliate fee growth partly offset by a 14% rise in expenditure related to the new cable channel initiatives, consolidation of Yes Network and 3% negative impact from fluctuations in foreign exchange rates.

OIBDA contribution from domestic channels increased 17% owing to sturdy OIBDA growth at the RSNs.

Further, at the domestic cable channels, affiliate revenues grew 19% due to continued growth across RSNs, FX Network and Fox News Channel along with contributions from the launches of Fox Sports 1 and FXX. Advertising revenues climbed 12%.

On the other hand, OIBDA contribution from International cable channels decreased 3% year over year mainly due to adverse currency fluctuations. Affiliate revenues grew 8% on the back of improved performances at FIC and STAR, partly offset by a 3% negative impact from the stronger U.S. dollar, primarily in Latin America. Advertising revenue rose 5%.

Filmed Entertainment 's OIBDA nearly tripled year over year to $339 million, driven by tremendous theatrical success of X-Men: Days of Future Past, The Fault in Our Stars and Rio 2 . In addition television products including syndication of Modern Family and new season of 24 contributed greatly.

Television segment's OIBDA fell 31.9% year over year to $145 million due to lower advertising (mainly declining ratings of American Idol ), which offset higher retransmission consent revenues.

Direct Broadcast Satellite Television posted a segment OIBDA of $146 million; a fall of 6.4% from the year-ago quarter due to higher programming costs associated with SKY Italia's broadcast of the FIFA and Sky Deutschland's broadcast of Bundesliga Soccer event. The 16% rise in segment revenues due to increasing subscriber base at Sky Deutschland was not enough to mitigate the higher costs.

SKY Italia ended the quarter with a subscriber base of 4.73 million and Sky Deutschland's net direct subscribers increased 82,000 in the quarter, taking the total direct subscribers count to 3.81 million.

Other Financial Details

Twenty-First Century Fox, which competes with CBS Corporation ( CBS ) and The Walt Disney Company ( DIS ), ended the quarter with cash and cash equivalents of $5,415 million. Total borrowings came in at $19,058 million and shareholders' equity came in at $17,418 million, excluding non-controlling interest of $3,483 million.

On Aug 5, 2014, the company announced a new share repurchase authorization of $6 billion with a one year time frame which replaces the remaining authorized amount under the company's existing share buyback program of $4 billion.

In the quarter, Twenty-First Century Fox bought back 30.1 million shares worth $1.02 billion, bringing the full year count to 114.9 million shares for $3.8 billion.

Further, the company declared dividend of 12.5 cents per share payable on Oct 15, 2014 to shareholders of record as of Sep10, 2014.

Other Developments

Along with earnings release, the company publicly abandoned its bid for rival Time Warner Inc. ( TWX ).

In Jul 2014, the company announced to transfer Sky Italia and its 57.4% ownership in Sky Deutschland to BskyB in exchange of $9.3 billion from BSkyB consisting of $8.6 billion in cash and rest in form of BSkyB's 21% interest in National Geographic Channels International.


Management expects total earnings before interest, taxes, depreciation and amortization (EBITDA) in fiscal 2015 to grow in high single-digit range over the $6.29 billion base of fiscal 2014. This excludes impact from Sky Italia and Sky Deutschland. Cable segment will lead the way with a high-single to low double-digit EBITDA growth in fiscal 2015.

The company is on track to achieve the $9 billion EBITDA target by fiscal 2016.

Management expects Television segment to perform better in fiscal 2015 due to higher retransmission consent revenues and political advertising. Also, Filmed entertainment segment will fare similarly as fiscal 2014 given a robust pipeline of movies. Cable segment will continue to benefit from rising affiliate fees in the next fiscal as well.

Though, Twenty-First Century Fox carries a Zacks Rank #4 (Sell), we are likely to see an upward revision in its rank given the better-than-expected results.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: FOXA , TWX , CBS , DIS



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