Twenty-First Century Fox, Inc.’s (FOXA) first-quarter fiscal 2015 adjusted earnings per share came in at 39 cents, ahead of the Zacks Consensus Estimate of 36 cents and up 18.2% year over year. Global box office success of Dawn of the Planet of the Apes and The Fault in Our Stars and 15.7% growth in affiliate fees were the main growth catalysts.
Including one-time items, earnings attributable to Twenty-First Century Fox came in at 47 cents per share, down from 54 cents posted in the year-ago quarter.
Moreover, the media conglomerate reported a 12% increase in total revenue to $7,887 million, miles ahead of the Zacks Consensus Estimate of $6,370 million.
The rise was due to growth across Cable Network Programming (up 15% to $3,231 million), Direct Broadcast Satellite Television division (up 4.2% to $1,449 million) and Filmed Entertainment (up 16.8% to $2,476 million), partly run down by flat revenues of $1,048 million at the Television segment.
The company’s total segment operating income before depreciation and amortization (OIBDA) registered 10% year-over-year increase to $1,779 million in the quarter, owing to increased OIBDA at Filmed Entertainment, Direct Broadcast Satellite Television, and Cable Network Programming division partly offset by declining OIBDA at the Television segment.
Detailed Discussion
OIBDA at Cable Network Programming grew 5% to $1,038 million on the back of growth in affiliate and advertising revenues partly offset by a 21% rise in expenditure related to new investments, consolidation of YES Network and 4% negative impact from fluctuations in foreign exchange rates.
OIBDA contribution from domestic channels increased 15% owing to sturdy OIBDA growth at the FOX News Channel and RSNs.
Further, at the domestic cable channels, affiliate revenues grew 18% due to continued growth across RSNs, FX Network and Fox News Channel and Fox Sports 1. Advertising revenues climbed 10%.
On the other hand, OIBDA contribution from International cable channels decreased 28% year over year mainly due to adverse currency fluctuations. Affiliate revenues grew 8% on the back of improved performances at FIC and STAR, partly offset by an 8% negative forex impact, primarily in Latin America. Advertising revenue rose 13%.
Fox Studio has earned over $4 billion at the box office so far this year driving Filmed Entertainment’s OIBDA up 40% year over year to $458 million, in the quarter. The tremendous theatrical success of The Fault in Our Stars, The Maze Runner and Dawn of the Planet of Apes along with Rio 2‘s superb home entertainment performance were the catalysts this quarter.
Direct Broadcast Satellite Television posted a segment OIBDA of $207 million, up 8.9% from the year-ago quarter. Revenue growth of 4% due to higher subscriber base at Sky Deutschland offset the increases in programming costs associated with SKY Italia’s broadcast of the FIFA.
SKY Italia ended the quarter with a subscriber base of 4.70 million, down 21,000, whereas Sky Deutschland’s net direct subscribers increased 96,000 in the quarter, taking the total direct subscribers count to 3.91 million.
Television segment’s OIBDA fell 24.7% year over year to $174 million, affected by declining TV advertising trends. Advertising revenues fell 5%, running down the growth in retransmission fees. Rise in costs at the FOX Broadcast Network as the company ramped up investments for original content was another factor.
Other Financial Details
Twenty-First Century Fox, which competes with CBS Corporation (CBS) and The Walt Disney Company (DIS), ended the quarter with cash and cash equivalents of $4,656 million. Total borrowings came in at $20,209 million and shareholders’ equity came in at $16,265 million, excluding non-controlling interest of $3,275 million.
On Aug 5, 2014, the company announced a new share repurchase authorization of $6 billion with a one year time frame. In the quarter, Twenty-First Century Fox bought back shares worth $1.27 billion and has $5.2 billion left under repurchase program.
Other Developments
In Jul 2014, the company announced its plan to transfer Sky Italia and its 57.4% ownership in Sky Deutschland to BskyB in exchange for $9.3 billion from BSkyB consisting of $8.6 billion in cash and rest in the form of BSkyB’s 21% interest in National Geographic Channels International. The transaction is expected to close in the second quarter of fiscal 2015.
In Oct 2014, Twenty-First Century Fox inked a joint venture deal with private equity firm Apollo Global Management, LLC (APO) to merge Endemol, Shine Group and CORE Media into a mega production house. The deal is also likely to close in the second quarter of fiscal 2015.
Though Twenty-First Century Fox carries a Zacks Rank #4 (Sell), we are likely to see an upward revision in its rank given the better-than-expected results.
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