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Twenty-First Century Fox (FOXA) Up 4.2% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Twenty-First Century Fox, Inc. (FOXA - Free Report) . Shares have added about 4.2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is FOXA due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Twenty-First Century Fox reported third-quarter fiscal 2018 adjusted earnings of 49 cents, which missed the Zacks Consensus Estimate by 3 cents and declined 5 cents from the year-ago quarter.

Revenues of $7.42 billion came ahead of the consensus mark of $7.31 billion but declined 2% from the year-ago quarter. This was due to the absence of Television advertisements for Super Bowl LI, which had largely benefited the company in the prior year quarter. However, increase in affiliate revenues at the Cable Network Programming was a positive.

Quarter Details

Segment wise, Cable Network Programming revenues (59.6% of total revenues) jumped 9.8% to $4.42 billion on the back of robust affiliate, syndication as well as advertising revenue growth.
Filmed Entertainment revenues (30.2%) were down 0.6% to $2.24 billion while Television segment net revenues (15.5%) decreased 32% to $1.15 billion, both on a year-over-year basis.

On the basis of component, affiliate revenues (47.3%) increased 11% from the year-ago quarter to $3.51 billion. At domestic cable channels, affiliate revenues grew 10% owing to a rise in contractual rate across all domestic brands. Affiliate revenues for international cable channels advanced 14% owing to an increase in rates and subscriber growth at FNG International as well as STAR.

Advertising revenues (21.1% of total) declined 26% year over year to $1.642 billion due to the absence of television advertising revenues of Super Bowl, which was broadcast in the year-ago quarter.

International advertising revenues for Cable Network Programming declined 1% primarily owing to the shift in timing of cricket matches, which overshadowed the improvement at FNG International.

Domestic advertising revenues for cable programming increased 3% year over year primarily due to increase in Fox News pricing.
 
Content revenues (28.9%) increased 3.4% year over year to $2.15 billion.

Operating Details

The company’s total segment operating income before depreciation and amortization (OIBDA) came in at $1.89 billion, down 2.3% year over year. Increase in OBIDA from Cable Network Programming was negated by decline in OIBDA from Television, Film Entertainment and Other, Corporate and Eliminations.

As a result, OIBDA margin of 25.5% contracted 10 basis points on a year-over-year basis.

OIBDA at Cable Network Programming rose 16.5% to $1.68 billion on higher revenues. The increase was partially offset by 6% rise in expenses due to higher sports and entertainment programming costs. Shift in cricket match timings attributed to lower sports programming costs for STAR India.

OIBDA contribution from domestic rose 15% year over year due to increase in contribution from all domestic brands. OIBDA contribution from International cable channels jumped 23% year over year backed by more than double contribution from STAR. However, lower performance at FNG International was a dampener.

Filmed Entertainment’s OIBDA slumped 23% to $286 million on account of lower revenues from the television production business. Further, increase in expenses due to the release of FoxNext Games’ mobile game Marvel Strike Force was an overhang.

Television segment’s OIBDA plunged 59% to $78 million on account of unfavorable comparison due to Super Bowl. Moreover, decline in broadcast and ratings of National Football League weighed on results.

Balance Sheet and Cash Flow

As of Mar 31, 2018, cash & cash equivalents were $7.32 billion compared with $5.81 billion as of Dec 31, 2017.

Cash flow from operations was $2.2 billion in the quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

VGM Scores

At this time, FOXA has an average Growth Score of C. Its Momentum is doing a lot better with an A. The stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise FOXA has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.




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