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Fox (FOXA) Down 0.1% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Fox (FOXA). Shares have lost about 0.1% in that time frame, underperforming the S&P 500.

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

Fox Q4 Earnings Top Estimates, Revenues Increase Y/Y

Fox Corporation reported fourth-quarter fiscal 2021 adjusted earnings of 65 cents, which beat the Zacks Consensus Estimate by 16.07%. The figure increased 4.8% year over year.

Revenues were up 19.5% year over year to $2.8 billion. The figure surpassed the consensus mark by 5.4%.

Affiliate fees (57.6% of revenues) rose 9.6% to $1.6 billion. Meanwhile, advertising (34% of revenues) revenues increased 37.9% to $982 million. Other revenues (8.4% of revenues) increased 29.9% from the year-ago quarter’s levels to $243 million.

Fox became a standalone, publicly-traded company on Mar 21, 2019, following the merger of Disney and Twenty-First Century Fox, Inc.

Standalone Fox’s portfolio comprises Twenty-First Century Fox’s news, sports and broadcast businesses. These include FOX News, FOX Business, FOX Broadcasting Company (the FOX Network), FOX Sports, FOX Television Stations Group, sports cable networks like FS1, FS2, FOX Deportes and Big Ten Network as well as certain other assets.

Top-Line Details

Cable Network Programming (48.4% of revenues) revenues increased 10.1% year over year to $1.39 billion. Advertising revenues increased 16.7%, primarily due to continued digital monetization at FOX News Media and the impact of additional live events and studio shows at FOX Sports in the current year quarter against postponements and cancellations in the prior- year quarter as a result of COVID-19.

Revenues from Affiliate fees increased 6% year over year driven by contractual price increases, including the impact of distribution agreement renewals.

Other revenues increased 73.5% on a year-over-year basis, driven by higher subscription revenues at FOX News Media.

Television (50.1% of revenues) revenues increased 30% from the year-ago quarter’s figure to $1.44 billion. Advertising revenues increased 50.8% year over year primarily due to a recovering base market at the FOX Television Stations, continued growth at Tubi and strong pricing at FOX Entertainment.

Affiliate fees and other revenues increased 16% and 17.6%, respectively. Affiliate revenues were driven by increases in fees from third-party FOX affiliates and higher average rates at the company’s owned and operated television stations.

Increase in other revenues was primarily due to higher content revenues at Bento Box and FOX Entertainment.

Operating Details

In fourth-quarter fiscal 2021, operating expenses increased 38% year over year to $1.6 billion. As a percentage of revenues, operating expenses expanded 760 basis points (bps) to 56.7%.

Selling, general & administrative (SG&A) expenses increased 9.3% year over year to $540 million. As a percentage of revenues, SG&A expenses contracted 170 bps to 18.7%.

Total adjusted EBITDA decreased 3.4% year over year to $707 million. EBITDA margin contracted 590 bps to 24.8%.

Cable Network Programming EBITDA remained flat year over year at $674 million. EBITDA margin contracted 490 bps to 48.2%.

Television EBITDA declined 12.4% to $148 million. EBITDA margin contracted 500 bps to 10.2%.

Balance Sheet

As of Jun 30, 2021, Fox had $5.88 billion in cash and cash equivalents compared with $5.7 billion as of Mar 31, 2021.

Long-term debt as of Jun 30, 2021 was $7.20 billion, which remained flat sequentially.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Fox has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Fox has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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