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Twenty-First Century Fox Misses Q1 Earnings

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Twenty-First Century Fox, Inc.’s (FOXA) first-quarter fiscal 2014 adjusted earnings of 33 cents per share came a penny below the Zacks Consensus Estimate and fell 13.2% from 38 cents earned in the prior-year quarter.

Twenty-First Century Fox, which competes with Walt Disney Company (DIS), Time Warner Inc. (TWX) and CBS Corporation (CBS), reported an increase of 17.6% in total revenue to $7,061 million on a year-over-year basis. The rise was due to growth across Cable Network Programming (up 12.3% to $2,810 million), Filmed Entertainment (up 9.4% to $2,120 million), Direct Broadcast Satellite Television division (up 67.9% to $1,390 million) and Television (up 7.8% to $1,048 million). Total revenue handily surpassed the Zacks Consensus Estimate of $6,798 million.

Total segment operating income before depreciation and amortization (:OIBDA) increased 1.8% year over year to $1,618 million in the quarter, driven by improvement at the company’s Direct Broadcast Satellite Television and Television segments, partly offset by tepid OIBDA growth in the Filmed Entertainment segment.

Management anticipates various investments including the launch of FXX and Fox Sports 1 to drive top-line growth in the future.

Segment Discussion

Operating income at Cable Network Programming fell 2.4% from the prior-year quarter to $991 million.  Expenditure related to the new cable channel initiatives, 3% negative impact from foreign exchange rate fluctuations and the timing of programming and marketing at the FX Network  all contributed to the decline. Contribution from domestic channels fell 7% as OIBDA growth at the RSNs, Fox News Channel, National Geographic Channels and Fox Business Channel was more than offset by the increased investment in the launch of Fox Sports 1 and FXX as well as reduced contribution from the FX Network.

Contribution from international cable channels advertising revenue rose 21%, gaining from robust currency growth at Fox International Channels (:FIC) and STAR.  

At the domestic cable channels, affiliate revenues grew 10% due to increased rates across all networks, with growth primarily driven by Regional Sports Networks, FX Network and Fox News Channel. Advertising revenues climbed 6%.

At the international cable channels, affiliate revenues grew 40%, reflecting improvement at FIC and STAR as well as gains from former ESS and EMM networks, partly offset by a 7% negative impact from the stronger U.S. dollar, chiefly in Latin America and India.

Filmed Entertainment’s operating income fell 24.2% year over year to $328 million, as the prior-year quarter benefited from the strong performance of Ice Age: Continental Drift.

Television segment’s operating income grew 29.8% year over year to $231 million on the back of a more than twofold rise in retransmission consent revenues.

Direct Broadcast Satellite Television  posted a segment operating profit of $190 million, demonstrating a twofold rise from the year-ago quarter due to the consolidation of Sky Deutschland results and lower programming expenses from SKY Italia.

SKY Italia ended the quarter with a subscriber base of 4.76 million, remaining flat year over year

Other Financial Details

Twenty-First Century Fox ended the quarter with cash and cash equivalents of $6,681 million, borrowings of $17,333 million, reflecting a debt-to-capitalization ratio of 50.2%, and shareholders’ equity of $17,224 million.

Further, On Oct 16, 2013, Twenty-First Century Fox paid a dividend of 12.5 cents per share, reflecting a 47% hike from the semi-annual dividend of 8.5 cents.  

Earlier, on Aug 8, 2012, the company’s board of directors approved a $4 billion worth of share buyback program. Through Nov 4, 2013, News Corporation bought back approximately $7.9 billion of shares at a price of $20.83 per share.

Other Developments

In Nov 2013, Twenty-First Century Fox announced that it has finalized the divestment of the remaining 12% ownership stake in Phoenix Satellite Television Holdings Ltd. for about $210 million.

Currently, Twenty-First Century Fox holds a Zacks Rank #3 (Hold).

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