Skip to Content
Stock Analyst Update

Opportunity in Fox?

While the quarter was disappointing for the wide-moat firm, we are encouraged by the continued strength of the domestic cable business.


 Fox (FOX) posted a slightly worse-than-expected fiscal third quarter, with revenue and EBITDA both slightly below our projections as the film studio continues to disappoint and the cable segment continues to suffer from demonetization in India. While the quarter was disappointing, we are encouraged by the continued strength of the domestic cable business which posted affiliate fee growth of 8%. We are maintaining our wide moat rating and our fair value estimate of $35. Currently trading in 4-star territory, the stock may offer an attractive entry point to investors.

Quarterly revenue of $7.56 billion was up 5% versus a year ago but 1% below our estimate, as growth at television (up 30%) and cable network (up 2%) was partially offset by the continued decline at filmed entertainment (down 3%). Cable network revenue was driven by domestic growth of 6% year over year, with affiliate fee revenue up 8%. The firm actually grew subscribers by 0.5% year over year, primarily at smaller channels. Unlike its peers, Fox did not see an acceleration in the loss of subscribers at its larger channels, which were down 1.5% versus same period last year. Domestic ad revenue was flat versus the prior year. Ad revenue benefited from strong ratings at FS1 and Fox News which were offset by decreased delivery at National Geographic.

International cable revenue fell by 7% as affiliate fee growth of mid-single digits was more than offset by the 18% decline in advertising revenue as STAR didn’t have the Twenty20 World Cup and demonetization continues to hamper the overall ad market in India. The 30% improvement at the television segment was driven by the Super Bowl which added about $500 million. The film division continues to struggle against tough comps as it was down 3%. EBITDA margin fell 40 basis points to 25.6% despite improvement at cable and broadcast which were more than offset by the 370 basis point decline at the film division.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Neil Macker does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.