On Apr 11, 2014, we issued an updated research report on
Twenty-First Century Fox, Inc.
) following the company's second-quarter fiscal 2014 results.
Headquartered in New York City, Twenty-First Century Fox is a
diversified global media and entertainment company, which was
formed following the split of
) into two entities on Jun 28, 2013.
The company boasts a formidable brand portfolio, which bolsters
its position in the market. The portfolio comprises well-known
channels such as FOX News, FSN, Fox Sports 1. Moreover, the
portfolio has quality content with respect to movies and
television along with 28 full-power broadcast television stations
and subsidiaries liker like SKY Italia BSkyB and Sky Deutschland
Further, Twenty-First Century Fox is laying special emphasis on
its portfolio of regional sports channels to strengthen the
company's Fox Sports Media Group's position in the lucrative
sports entertainment business, where it competes with
The Walt Disney Co.
) sports coverage network, ESPN.
Another advantage for the company is the tremendous upside
potential seen in affiliate and retransmission fees. Affiliate
fees are a dominant source of revenue for Cable Network
Programming segment and are a major contributor to the total
revenue. In the second quarter of fiscal 2014, affiliate revenues
for Cable network grew 17% owing to a rise of 15% and 22% in the
Domestic and International segments, respectively. In fiscal
2013, affiliate revenues were 28% of the total revenue while for
fiscal 2012, it was 25% and for fiscal 2011, it was 22%.
Going forward, the company is anticipating a good run at the
Cable programming segment, driven by steady revenue growth,
partly offset by moderate rise in expenses, especially sports
However, Twenty-First Century Fox continues to disappoint on the
earnings front. In the second quarter, the company's earnings of
33 cents fell a penny short of the Zacks Consensus Estimate and
declined 5.7% year over year. Moreover, in the trailing four
quarters, the company has missed the estimate by an average of
In addition, management gave a cautious commentary regarding the
performance of the Filmed Entertainment and Television segments
in fiscal 2014. As per management, lower-than-expected results of
Filmed Entertainment in the first half of the year will be
reflected on the full-year outlook. Also, lower prime-time
ratings of X-Factor and American Idol are expected to weigh on
advertising revenues in the Television segment.
Subsequently, management lowered its total earnings before
interest, taxes, depreciation and amortization (EBITDA)
expectations for fiscal 2014. The company now expects EBITDA to
grow in the mid to high single digit range, as against earlier
expectations of low-double-digit to high-single growth, above the
$6.26 billion total segment EBITDA base level of fiscal 2013.
Also, management expects weakening currencies of emerging
economies (especially Latin America and India) to have a profound
impact on the Cable segment by reducing $50-$75 million of its
revenues, in addition to $100 million (includes impact of new
channel launches) already expected at the beginning of fiscal
Currently, Twenty-First Century Fox carries a Zacks Rank #3
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