21st Century Fox (FOXA) Beats on Q2 Earnings, Revenues Lag

Twenty-First Century Fox, Inc.FOXA reported better-than-expected earnings for the third straight quarter. The company's second-quarter fiscal 2017 earnings from continuing operations came in at 53 cents, which surpassed the Zacks Consensus Estimate of 49 cents and increased 20.5% year over year.

Including one-time items, earnings came in at 46 cents a share compared with 34 cents in the year-ago quarter. Twenty-First Century Fox's earnings were driven by robust advertising as well as affiliate fees at the company's broadcast and cable-television divisions. Television growth was aided by hosting the World Series, while cable segment benefited from the robust ratings during the presidential campaign.

Twenty-First Century Fox, Inc. Price, Consensus and EPS Surprise

Twenty-First Century Fox, Inc. Price, Consensus and EPS Surprise | Twenty-First Century Fox, Inc. Quote

Though total revenues of $7,682 million improved 4.2% year over year. However, revenues missed the Zacks Consensus Estimate of $7,712 million after beating the same in the previous quarter primarily due to lower content revenues at the Filmed Entertainment division. Moreover, top-line growth was limited by $84 million negative impact of foreign currency exchange rate.

Due to mixed results not much movement was noticed in the stock during after hours trading session. However, third consecutive quarter of earnings beat has helped the stock to surge more than 22% in the past six months, outperforming the Zacks categorized Movie/TV Production/Distribution industry, which has surged nearly 16%.

Segment wise, Cable Network Programming revenues jumped 7.1% to $3,967 million on the back of robust affiliate and advertising revenues growth.

Filmed Entertainment revenues were down 3.9% to $2,269 million, while Television segment net revenues were up 11.8% to $1,918 million, both on a year-over-year basis.

The company's adjusted total segment operating income before depreciation and amortization (OIBDA) advanced 15.3% year over year to $1,994 million in this fiscal quarter. Increase in OBIDA was due to higher contribution from the Filmed Entertainment, Cable Network Programming and Television segments.

Detailed Discussion

OIBDA at Cable Network Programming climbed 6% to $1,330 million primarily owing to 7% increase in revenues. The increase was partially overshadowed by 8% increase in expenses. The rise in expenses was mostly due to increased Major League Baseball ("MLB") sports rights costs at FOX Sports 1 ("FS1") as well as higher National Basketball League sports rights costs at the regional sports networks ("RSNs"). Foreign currency fluctuations hurt the segment's OIBDA growth by 2%, primarily in Latin America.

OIBDA contribution from domestic channels rose 12% owing to sturdy OIBDA growth at Fox News and FX Networks.

Further, at the domestic cable channels, affiliate revenues grew 7% driven by sustained growth across FS1, FX Networks, Fox News Channel and RSNs. Domestic advertising revenues increased 12% on increase in pricing and rating both at Fox News.

Moreover, OIBDA contribution from International cable channels slumped 13% on lower advertising revenues. Further, it was hampered by foreign currency headwinds. Affiliate revenues climbed 5% due to growth in local currency. Both Fox Networks Group International ("FNGI") and STAR India witnessed double digit growth.

Filmed Entertainment 's OIBDA surged 29% to $389 million in the quarter primarily owing to higher contributions from the company's film studio due to decrease in theatrical releasing costs.

Television segment's OIBDA rose 35% to $376 million. The segment was primarily benefited by increase in sports advertising revenues, robust local political advertising spending, higher retransmission consent revenues and higher content revenues at the FOX Broadcast Network.

Other Financial Details

Twenty-First Century Fox ended the quarter with cash and cash equivalents of $4,530 million. Total borrowings came in at $19,813 million and shareholders' equity, excluding non-controlling interest of $1,215 million, came in at $14,340 million.

In reported quarter, Twenty-First Century Fox bought back 4.8 million shares for $132 million. At the end of the quarter, the company had $3.1 billion remaining under the current share buyback program.

Other Developments

Rupert Murdoch's Twenty-First Century Fox has made a "Possible Offer" to purchase remaining 61% stake in Europe's leading pay-TV broadcaster Sky plc. The company already owns 39.1% stake in Sky. The buyout will strengthen the company's position in pay-TV network in Britain, Ireland, Austria, Germany and Italy.

As of 2016, Sky already has 21 million pay-TV subscribers and 30,000 employees. Moreover, the deal will strengthen Sky's position in entertainment and sport, and will also strengthen its adjusted earnings and free cash flow.

Zacks Rank & Other Stocks to Consider

Twenty-First Century Fox carries a Zacks Rank #3 (Hold). Better-ranked stocks worth considering include Eros International Plc EROS , Lions Gate Entertainment Corp. LGF.A and Meredith Corporation MDP . All these stocks has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Eros International has a long-term earnings growth rate of 15%.

Lions Gate Entertainment has surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average estimate of 205.1% and also has an impressive long-term earnings growth rate of 10%.

Meredith has beaten the Zacks Consensus Estimate of earnings in all of the trailing four quarter, with an average of 7.6%.

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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.

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

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