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Should You Buy 21st Century Fox (FOXA) Stock Ahead of Earnings?

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Twenty-First Century Fox (FOXA - Free Report) saw its stock price climb Monday only a few days before the media company is set to release its Q4 and fiscal 2018 financial results. The question is should investors consider buying FOXA stock ahead of Wednesday’s earnings release amid all the Disney (DIS - Free Report) acquisition and Sky PLC news?

Overview

Twenty-First Century Fox and Disney shareholders approved Disney’s $71 billion bid for key Fox assets at the end of July. A completed deal would see Disney purchase Fox’s film and television studios, its stakes in Hulu and Sky PLC, and more. Notably left of the deal are Fox News, Fox Sports 1, the Fox broadcast network, as well as a few others.

Therefore, Fox will keep its nightly news juggernaut, its major sports coverage, which includes the NFL, and some other key assets. Still, Rupert Murdoch’s historic media company is ready to become a much smaller operation as it aims to narrow its focus during the streaming TV age dominated by the likes of Netflix (NFLX - Free Report) and Amazon (AMZN - Free Report) .

Price Movement

FOXA has seen its stock price surge over 62% during the last year, with much of the gains coming on the back of last November’s initial news that Disney was in pursuit of a large chunk of the company. This climb crushes the S&P 500’s 15% surge. But prior to this impressive surge, shares of Fox had moved mostly sideways over much of the last 36 months.

 

Valuation

Moving on, FOXA stock is currently trading at 21.4X forward 12-month Zacks Consensus EPS estimates, which represents a premium against the S&P’s 17.3X and its industry’s 19.5X. Over the last year, the firm has traded as high as 25.1X.

However, FOXA has traded as low 12X over this time and rocks a one-year median of 16.8X. The company is also currently trading near its three-year high, which means FOXA’s valuation picture appears relatively stretched at the moment.

 

Outlook

Fox is expected to see its quarterly earnings skyrocket by over 50% to touch $0.54 per share, based on our current Zacks Consensus Estimate. However, its full fiscal year earnings are projected to slip marginally to $1.92 per share.

At the top of the income statement, FOXA’s revenues are projected to hit $7.75 billion, which would mark a nearly 15% climb and is impressive for a company of its age and size. Meanwhile, its fiscal 2018 revenues are set to hit $30.04 billion.

Earnings Trends

Fox has seen mixed earnings estimate revision activity for the fourth quarter over the last 30 days, with one upward change against one downward revision. Yet, FOXA has earned four full-year earnings revisions during this same time period, with 100% agreement to the downside.

With that said, the company has topped or matched our quarterly earnings estimates almost every quarter for more than three years, with the lone exception coming last quarter.

Fox stock is currently a Zacks Rank #3 (Hold) based mostly on its recent earnings revisions trends. Plus, the company has already seen some big gains this year on the back of acquisition-related news, which means FOXA might be a stock to just watch for now.

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