Will the Weakening US Dollar Benefit 21st Century Fox?
How Will Fiscal 2H16 Play Out for 21st Century Fox?
Movement of the US dollar
21st Century Fox’s (FOXA) management stated on the company’s fiscal 2Q16 earnings call that it expected its EBITDA (earnings before interest, tax, depreciation, and amortization) for fiscal 2016 to be impacted by about -$350 million due to exchange rate fluctuations.
Over the past six months of FOXA’s fiscal 2016, its EBITDA has been adversely impacted by the strengthening US dollar (UUP) to the tune of $220 million. This adverse effect has already exceeded the company’s guidance for fiscal 2016. For fiscal 2016, the company expected its total EBITDA to be flat or to grow in the low single digits.
However, considering that 21st Century Fox has significant international operations, it’s important to note that the PowerShares DB US Dollar Index Bullish (UUP) that tracks the US dollar fell by 5.1% in the first quarter of 2016 and 4% in the past year. It’ll be interesting to see how the fall in the dollar affects FOXA in its fiscal 3Q16.
In August 2015, the company stated that it expected a negative impact of $200 million on its EBITDA growth rate in fiscal 2016 due to currency fluctuations. FOXA expects the adverse effect of currency fluctuations to continue for the rest of fiscal 2016, because the company has a sizable cable network and film business in international markets.
Other media companies affected by the rising dollar
Another company whose earnings were negatively impacted by the rising dollar was News Corporation (NWSA) in 4Q15. News Corporation’s revenue was negatively impacted by $141 million worth of foreign currency exchange rate fluctuations.
Discovery Communications’ (DISCA) international networks made up around 50% of the company’s total revenue in 4Q15 and 2015. Adverse currency fluctuations negatively impacted Discovery’s revenues in 4Q15 and 2015 by 8% and 2%, respectively.
21st Century Fox makes up 0.66% of the PowerShares QQQ Trust, Series 1 ETF (QQQ). QQQ also holds 5.6% of Amazon (AMZN) and has exposure of 4.2% to the television sector.
Browse this series on Market Realist:
