Fox (FOXA) Down 14.5% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Fox (FOXA). Shares have lost about 14.5% 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 Q1 Earnings & Revenues Top Estimates

Fox reported first-quarter fiscal 2021 adjusted earnings of $1.11 per share, which beat the Zacks Consensus Estimate by 11%. The figure, however, decreased 5.9% year over year.

Revenues were up 12% year over year to $3.05 billion. Also, the figure surpassed the consensus mark by 4.6%.

Affiliate fees (545% of revenues) rose 8.7% to $1.67 billion. Meanwhile, advertising (37% of revenues) revenues increased 16.6% to $1.13 billion. Other revenues (8% of revenues) were up 15.3% from the year-ago quarter’s levels to $248 million.

Top-Line Details

Cable Network Programming (46.5% of revenues) revenues increased 6.9% year over year to $1.42 billion. Under the segment, Advertising revenues increased 4%, primarily on continued digital monetization at FOX News Media, and the favorable impact of additional live events and studio shows at FOX Sports in the reported quarter against the postponements and cancellations in the prior-year quarter due to COVID-19.

Revenues from Affiliate fees climbed 5% year over year driven by contractual price increases, including the impact of distribution agreement renewals.

Other revenues increased 49% on a year-over-year basis, on higher FOX Nation subscription revenues and return of sports sublicensing revenues and pay-per-view boxing.

Television (51.9% of revenues) revenues increased 17.1% from the year-ago quarter’s figure to $1.58 billion. Under the segment, Advertising revenues improved 22% year over year primarily on a recovering base market at the FOX Television Stations, continued growth at Tubi and strong pricing at FOX Entertainment.

Affiliate fees and other revenues jumped 14% mainly fueled by the increases in fees from third-party FOX affiliates, and higher average rates at the company’s owned and operated television stations.

Operating Details

In first-quarter fiscal 2022, operating expenses flared up 34.5% year over year to $1.57 billion. As a percentage of revenues, operating expenses shot up 860 basis points (bps) to 51.6%.

Selling, general & administrative (SG&A) expenses rose 7% year over year to $415 million. As a percentage of revenues, SG&A expenses contracted 70 bps to 13.6%.

The total adjusted EBITDA decreased 8.7% year over year to $1.06 billion. The EBITDA margin shrunk 800 bps to 34.9%.

Balance Sheet

As of Sep 30, 2021, Fox had $5.41 billion in cash and cash equivalents compared with $5.89 billion as of Jun 30, 2021.

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

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -62.96% due to these changes.

VGM Scores

Currently, 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 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.

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