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Why Is Fox (FOXA) Up 2.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for Fox (FOXA). Shares have added about 2.6% in that time frame, underperforming the S&P 500.

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

Fox Q3 Earnings Miss Estimates, Revenues Increase Y/Y

Fox Corporation reported third-quarter fiscal 2022 adjusted earnings of 81 cents, which missed the Zacks Consensus Estimate by 4.71%. The figure decreased 8% year over year.

Revenues were up 7.5% year over year to $3.4 billion. The figure surpassed the consensus mark by 1.72%.

Affiliate fees (52% of revenues) rose 4.5% to $1.79 billion. Meanwhile, advertising (37.8% of revenues) increased 9.1% to $1.3 billion. Other revenues (10.2% of revenues) increased 17.8% from the year-ago quarter’s levels to $351 million.

Top-Line Details

Cable Network Programming (45.8% of revenues) revenues increased 7.6% year over year to $1.58 billion. Advertising revenues increased 19.8%, primarily due to continued strength in pricing and higher ratings, partially offset by the impact of higher preemptions associated with breaking news coverage at FOX News Media.

Revenues from Affiliate fees increased 2.7% year over year, driven by contractual price increases. Other revenues increased 22.5% on a year-over-year basis, driven by the timing of sports sublicensing revenues, which were impacted by COVID-19 in the prior-year quarter, and higher FOX Nation subscription revenues.

Television (52.7% of revenues) revenues increased 7.4% from the year-ago quarter’s figure to $1.82 billion. Advertising revenues increased 5.9% year over year, primarily due to continued growth at Tubi, continued strength in pricing at the FOX Network, partially offset by the absence of the rotating NFL Divisional playoff game in the current-year quarter and softer entertainment ratings at the FOX Network.

Affiliate fees increased 7.5% year over year, driven by increases in fees from third-party FOX affiliates and higher average rates at the company’s owned and operated television stations. Other revenues increased 17.1% year over year, primarily due to the impact of the consolidation of MarVista Entertainment, TMZ and Studio Ramsay Global.

Operating Details

In third-quarter fiscal 2022, operating expenses increased 14.8% year over year to $2.16 billion. As a percentage of revenues, operating expenses expanded 400 basis points (bps) to 62.7%.

Selling, general & administrative (SG&A) expenses increased 11% year over year to $485 million. As a percentage of revenues, SG&A expenses expanded 40 bps to 14%.

Total adjusted EBITDA decreased 9.8% year over year to $811 million. EBITDA margin contracted 450 bps to 23.5%.

Cable Network Programming EBITDA increased 1.6% year over year to $864 million. EBITDA margin contracted 320 bps to 54.6%.

Television EBITDA declined 74.1% to $35 million. EBITDA margin contracted 600 bps to 1.9%.

Balance Sheet

As of Mar 31, 2022, Fox had $4.63 billion in cash and cash equivalents compared with $4.26 billion as of Dec 31, 2021.

Long-term debt, as of Mar 31, 2022, was $7.20 billion, which remained flat sequentially.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Fox has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 indicates a downward shift. Notably, Fox has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Fox belongs to the Zacks Broadcast Radio and Television industry. Another stock from the same industry, Grupo Televisa (TV), has gained 18.7% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Grupo Televisa reported revenues of $907.48 million in the last reported quarter, representing a year-over-year change of -22.6%. EPS of -$0.18 for the same period compares with -$0.05 a year ago.

Grupo Televisa is expected to post earnings of $0.24 per share for the current quarter, representing a year-over-year change of +26.3%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Grupo Televisa. Also, the stock has a VGM Score of C.


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