Strong Quarter for Fox
The media conglomerate continues to drive fee growth at its core brands while expanding the subscriber base of its newer channels.
Fox (FOX) reported a strong end to fiscal 2018 as fourth-quarter revenue came above the Street projection and EBITDA was in line with the consensus projections. On the last scheduled quarterly conference call as Twenty-First Century Fox, management began to try to shift investors' focus towards New Fox Co and its large bet on news and live sports, as the deal with Disney is expected to close in the first half of 2019. One of the key drivers for the successor firm will be the NFL, which management expects to generate three of the top five rated shows on Fox each week this fall. We are maintaining our wide moat rating and our fair value estimate of $46. As a reminder, our fair value estimate is based on the Disney deal and the value of the successor firm. If the deal were to collapse, our standalone fair value for the firm is $35.
Quarterly revenue was up 18% versus a year ago to $7.9 billion as three segments posted double-digit growth. The cable segment was up 14%, driven by 11% domestic affiliate fee growth, as Fox continues to drive fee growth at its core brands while expanding the sub base of its newer channels. Domestic advertising revenue improved by 1%, as the strength at Fox News and the FIFA World Cup more than offset the declines at the RSNs. International cable continues to expand with 25% revenue growth, driven by the improvement in affiliate fees (up 12%) and ad revenue (up 55%). EBITDA margin for the cable segment fell by 50 basis points to 38.7% as the revenue growth was more than offset by the increased programming and marketing costs at FX and increased Sports rights for FIFA World Cup and the IPL.
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Neil Macker does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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