Updated Research Report on 21st Century Fox - Analyst Blog


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On Apr 11, 2014, we issued an updated research report on Twenty-First Century Fox, Inc. ( FOXA ) 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 News Corp. ( NWSA ) 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 AG.

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. 's ( DIS ) 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 rights.

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 4.9%.

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 2014.

Currently, Twenty-First Century Fox carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Another better-performing retail stock worth investment is Barnes & Noble, Inc. ( BKS ) which sports a Zacks Rank #1 (Strong Buy).

BARNES & NOBLE (BKS): Free Stock Analysis Report

DISNEY WALT (DIS): Free Stock Analysis Report

TWENTY-FST CF-A (FOXA): Free Stock Analysis Report

NEWS CORP NEW-A (NWSA): Free Stock Analysis Report

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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 Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: BKS , DIS , FOXA , NWSA

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