Why Is Fox (FOXA) Down 8% Since Last Earnings Report?

It has been about a month since the last earnings report for Fox (FOXA). Shares have lost about 8% 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 the most recent earnings report in order to get a better handle on the important drivers.

Fox Q4 Earnings Miss Estimates, Revenues Increase Y/Y

Fox Corporation reported fourth-quarter fiscal 2022 adjusted earnings of 74 cents, which missed the Zacks Consensus Estimate by 6.3%. The figure increased 13.8% year over year.

Revenues were up 4.9% year over year to $3.03 billion. The figure missed the consensus mark by 0.8%.

Affiliate fees (56.9% of revenues) rose 3.7% to $1.72 billion. Meanwhile, advertising (34.8% of revenues) increased 7.4% to $1.05 billion. Other revenues (8.3% of revenues) increased 3.7% from the year-ago quarter’s levels to $252 million.

Top-Line Details

Cable Network Programming (48.1% of revenues) revenues increased 4.4% year over year to $1.46 billion. Advertising revenues increased 14%, 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 1.7% year over year, driven by contractual price increases. Other revenues remained flat on a year-over-year basis, primarily due to higher FOX Nation subscription revenues being offset by the timing of sports sublicensing revenues, which were impacted by COVID-19 in the prior-year quarter.

Television (50.3% of revenues) revenues increased 5.4% from the year-ago quarter’s figure to $1.52 billion. Advertising revenues increased 4.5% year over year, primarily due to higher political advertising revenues at the FOX Television Stations, continued growth at TUBI and the addition of the USFL at FOX Sports, partially offset by lower ratings at FOX Entertainment.

Affiliate fees increased 6.9% 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 2.9% year over year, primarily due to the impact of the consolidation of MarVista Entertainment, TMZ and Studio Ramsay Global.

Operating Details

In fourth-quarter fiscal 2022, operating expenses increased 4.7% year over year to $1.71 billion. As a percentage of revenues, operating expenses contracted 100 basis points (bps) to 56.5%.

Selling, general & administrative (SG&A) expenses increased 2.2% year over year to $552 million. As a percentage of revenues, SG&A expenses expanded 500 bps to 18.2%.

Total adjusted EBITDA increased 7.4% year over year to $770 million. EBITDA margin expanded 60 bps to 25.4%.

Cable Network Programming EBITDA decreased 6.8% year over year to $628 million. EBITDA margin contracted 520 bps to 43%.

Television EBITDA jumped 52.7% to $226 million. EBITDA margin expanded 460 bps to 14.8%.

Balance Sheet

As of Jun 30, 2022, Fox had $5.2 billion in cash and cash equivalents compared with $4.63 billion as of Mar 31, 2022.

Long-term debt, as of Jun 30, 2022, was $7.20 billion, which remained flat sequentially.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined 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 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

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 is part of the Zacks Broadcast Radio and Television industry. Over the past month, TEGNA Inc. (TGNA), a stock from the same industry, has gained 0.4%. The company reported its results for the quarter ended June 2022 more than a month ago.

TEGNA Inc. reported revenues of $784.88 million in the last reported quarter, representing a year-over-year change of +7.1%. EPS of $0.60 for the same period compares with $0.50 a year ago.

For the current quarter, TEGNA Inc. is expected to post earnings of $0.72 per share, indicating a change of +30.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -8.9% over the last 30 days.

TEGNA Inc. has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.

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