Fox earnings miss forecasts after cable investments

Reuters

By Lisa Richwine

LOS ANGELES, Nov 5 (Reuters) - Rupert Murdoch's 21st CenturyFox Inc TV and film company reported quarterly earningson Tuesday that missed Wall Street expectations, hurt byinvestments in new cable channels and a weaker performance fromits movie releases.

Fox shares dropped 2 percent in after-hours trading to$33.40, down from their $34.09 close on Nasdaq.

Fox posted adjusted earnings-per-share of 33 cents for thequarter that ended in September, down from 38 cents a yearearlier. Wall Street analysts had forecast 35 cents per share onaverage, according to Thomson Reuters I/B/E/S.

In June, News Corp split its publishing and entertainmentbusinesses, with the film and TV units forming the new 21stCentury Fox.

For its first quarter as a separate company, Fox recordedtotal revenue of $7.06 billion, an 18 percent increase from thesame period a year earlier.

But net income dropped as Fox invested in Fox Sports 1, acompetitor to Walt Disney Co's ESPN that launched inAugust, and FXX, a channel aimed at young adults that made itsdebut in September.

Quarterly income from continuing operations slumped to $768million, down from $2.3 billion a year earlier. The previousyear's quarter included $1.4 billion from an asset sale.

"The investment we are making, including the launch of FXXand Fox Sports 1, will drive future sustained growth," Murdochsaid in a statement.

At the cable networks unit, operating income beforedepreciation and amortization, a measure of profit, fell to $991million from $1.0 billion a year earlier. Morningstar analystMichael Corty said the decline in the cable networks businesswas not surprising given the launch of the new sports channel.

"Overall, I thought the results were solid," he said.

At the film division, OIBDA dropped to $328 million from$433 million a year earlier. The studio's releases includedbig-budget action movie "The Wolverine" and female buddy comedy"The Heat." Those films could not match the success a yearearlier of animated blockbuster "Ice Age: Continental Drift."

Fox Chief Operating Officer Chase Carey, on a conferencecall with analysts, said the company was on track to repurchasethe $4 million in Class A shares this year that it announced onAugust 2013.

Carey said it was unlikely Fox would be in the market to buyTV stations.

"We're always opportunistic, but we're pretty pleased withour group," he added.

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