Cable network dominates 21st Century Fox earnings
Recently, stocks of media companies such as 21st Century Fox (FOXA) and The Walt Disney Company (DIS) were hammered. This was mainly due to rising subscriber losses for pay-TV companies, which spooked investors in the media sector.
21st Century Fox announced its fiscal fourth quarter and full fiscal 2015 earnings on August 5, 2015. In fiscal 2015, the company had revenues of ~$29 billion, a 9% decrease from its revenues in fiscal 2014. The company had an adjusted OIBDA (operating income before depreciation and amortization) of ~$6.5 billion, an increase of 3% over last fiscal year. Adjusted OIBDA excludes impairment charges, discontinued operations, depreciation and amortization, and earnings from equity affiliates.
21st Century Fox holds a 39% equity stake in Sky (SKYAY), an entertainment and communications company in the UK. During fiscal 2015, the company had net proceeds of $7.3 billion from the sale of its stake in Sky Italia and Sky Deutschland to Sky.
Along with this transaction, 21st Century Fox acquired a 21% stake in Sky’s National Geographic Channel for $650 million. National Geographic is a strong competitor to Discovery Communications’ (DISCA) Discovery Channel.
21st Century Fox operates primarily in three business segments: Cable Network Programming, Television, and Filmed Entertainment. As the above chart indicates, the Cable Network Programming segment is the biggest contributor to the company’s revenues, with about a 48% share and revenues of ~$13.8 billion in fiscal 2015. Other revenues came from Direct Broadcast Satellite Television (primarily Sky Italia and Sky Deutschland, whose stake was sold off in November 2014).
Company outlook in fiscal 2016
21st Century Fox expects its Cable Network Programming segment to propel its growth in fiscal 2016. It expects its total company EBITDA (earnings before interest, taxes, depreciation, and amortization) growth percentage to be in the mid single digits. Specifically, the company expects a negative impact of 3% on the EBITDA growth rate due to foreign exchange rate fluctuations.
The strong US dollar (UUP) has been a recurring theme affecting earnings for media network companies. The Walt Disney Company also expects a negative impact on its operating income due to exchange rate fluctuations.
You can get diversified exposure to 21st Century Fox by investing in the Consumer Discretionary SPDR ETF (XLY), which maintains 2.23% of its holdings in the company’s stock.