21st Century Fox (FOXA) Q2 Earnings in Line, Revenues Miss

After beating the Zacks Consensus Estimate for seven consecutive quarters, Twenty-First Century Fox, Inc.FOXA reported in-line earnings of 44 cents a share in the second quarter of fiscal 2016. However, quarterly earnings declined 17% year over year, disappointing investors. This was clearly reflected in the after-market trading hours yesterday, when shares tumbled 4.4%.

Including one-time items, earnings came in at 34 cents per share, plummeting 88.2% from the year-ago quarter.

Also, total revenue of $7,375 million fell short of the Zacks Consensus Estimate of $7,564 million while declining 8.4% year over year. On an adjusted basis, total revenue declined 0.7% to $7,375 million.

The company's second-quarter fiscal 2016 results were marred by the negative impact of foreign currency exchange rate and dismal results at the company's film division, which overshadowed the company's robust performance at Cable Network Programming segment.

Segment wise, Cable Network Programming revenues grew 9.4% to $3,703 million, driven by robust affiliate growth revenue as well as due to increase in advertising revenues. Filmed Entertainment revenues declined 14.2% to $2,361 million, whereas Television segment reported net revenues of $1,716 million, up 5.7% year over year.

The company's adjusted total segment operating income before depreciation and amortization (OIBDA) increased 2.1% year over year to $1,730 million in the fiscal quarter, owing to increased OBIDA at the Cable Network Programming that somewhat offset decreased OIBDA at Filmed segments.

Detailed Discussion

OIBDA at Cable Network Programming increased 7.9% to $1,250 million on the back of 9% growth in affiliate fees and higher advertising revenues, which was to somewhat offset by a 10% increase in expenses. The rise in expenses was mostly due to impact from the recently acquired National Geographic Partners businesses and increase in strategic sports programming costs for Major League Baseball, soccer and college football rights. Foreign currency fluctuations affected the segment's OIBDA growth by 5%.

OIBDA contribution from domestic channels increased 7% owing to sturdy OIBDA growth at FX News as well as domestic sports channels.

Further, at the domestic cable channels, affiliate revenues grew 10% due to continued growth across FS1, FX News and Fox News Channel and growth across all other domestic cable networks. Advertising revenues were up 3% due to robust growth at sports channels and Fox News.

On the other hand, OIBDA contribution from International cable channels increased 8% due to strong local currency growth, offset by the impact of currency headwinds. Affiliate and advertising revenues fell 1% each as 11% growth in local currency at STAR as well as the Fox International Channels ("FIC") was negated by 12% forex impact.

Filmed Entertainment's OIBDA was down 10.1% to $302 million in the quarter as there was no contribution from Shine and being affected by lesser worldwide home entertainment revenues. Intensified currency headwinds added to the woes.

Television segment's OIBDA decreased 4.8% to $279 million driven by increase in contractual sports programming costs at the FOX Broadcast Network, which overshadowed higher revenues at Television segment.

Other Financial Details

Twenty-First Century Fox ended the quarter with cash and cash equivalents of $4,293 million. Total borrowings came in at $19,737 million and shareholders' equity came in at $14,504 million, excluding non-controlling interest of $991 million.

On Aug 4, 2015, the company announced a new share repurchase authorization of $5 billion with a one-year time frame. In fiscal first quarter, Twenty-First Century Fox bought back 45 million shares for $1.3 billion.

At present, Twenty-First Century Fox carries a Zacks Rank #3 (Hold). Some better-ranked media stocks include Time Warner Inc. TWX , Nexstar Broadcasting Group, Inc. NXST and World Wrestling Entertainment Inc. WWE . All these stocks hold a Zacks Rank #2 (Buy).

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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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