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Stock Strategist

Let's Go to the Video

Fox's cable networks and film studio are outstanding businesses with long-lasting competitive advantages.

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 Twenty-First Century Fox (FOX)/(FOXA) posted good overall results for its fiscal third quarter, and the media conglomerate is on pace to meet our full-year expectations. Although the firm continues its planned investments in film and television, profitability this quarter was steady, and management reiterated its stretch goal of achieving $9 billion of EBITDA in fiscal 2016. Our base-case model assumes a slightly more conservative path over the next few years.

Fox generated top-line growth of 12% growth versus the year-ago period, and gains in cable programming (up 11%) and television (up 27%) were relative standouts. We were encouraged by the 8% increase in domestic performance (advertising and affiliate revenue up 8% and 12%, respectively), but there were also reported foreign exchange headwinds in the quarter that obscured some of the underlying operational gains. Filmed entertainment was the only segment to post a revenue decline (off 3%) though we expect improvements owing to the April release of Rio 2 and continued monetization of television content via subscription video on demand. We continue to watch the firm's broadcast network performance as an indication of not only changing viewer trends but also Fox's ability to monetize its quality content around the year (and via different platforms).

Peter Wahlstrom has a position in the following securities mentioned above: AAPL. Find out about Morningstar’s editorial policies.