Fox Corporation reported third-quarter fiscal 2024 adjusted earnings per share of $1.09, surpassing the Zacks Consensus Estimate by an impressive 11.22%. This marked a significant 16% increase from the previous year, displaying the company’s resilience in challenging times.
Despite this positive outcome, total revenues saw a decline of 15.6% year-over-year, amounting to $3.44 billion. Notably, affiliate fees experienced a 4.4% increase, reaching $1.93 billion, driven by notable growth in the Television segment.
However, advertising revenues, constituting 35.8% of total revenues, plummeted by 34.1% to $1.24 billion. This decline was primarily attributed to the absence of the prior year’s broadcast of Super Bowl LVII and a decrease in NFL games on FOX Sports.
Additional revenues, accounting for 7.9% of the total, declined by 22.2% year over year to $274 million, adding to the challenges faced by Fox Corporation.
Delving Deeper into the Financials
In terms of revenue distribution, Cable Network Programming revenues made up 42.7% of total revenues, declining by 6.2% to $1.47 billion. While advertising revenues within this segment fell by 6.3%, revenues from Affiliate fees experienced a modest 1% growth year over year. Interestingly, other revenues in this category witnessed a stark 55.3% decline, mostly due to the timing of sports sublicensing revenues at the national sports networks.
On the other hand, Television revenues accounted for 56.2% of total revenues but saw a significant 21.7% decline from the previous year, amounting to $1.93 billion. Advertising revenues within this segment took a substantial hit, dropping by 39.8%. Despite this, Affiliate fees recorded a commendable 9.2% increase year over year. The rise was attributed to higher rates at both the company’s owned and operated stations and third-party FOX affiliates. Other revenues in Television increased by 8.6% year over year, driven by the timing of deliveries from FOX Entertainment Studios.
Operational Efficiency and Financial Health
Fox Corporation displayed prudent management of operating expenses, with a 24.8% decrease year over year to $2.05 billion. This resulted in a contracting of operating expenses to 59.5% of revenues, a significant 730 basis points improvement. Lower sports programming rights amortization and production costs, attributed to the absence of key events like Super Bowl LVII and fewer NFL games, played a significant role in this positive outcome.
Selling, general, and administrative expenses decreased by 3.4% to $510 million, though as a percentage of revenues, they expanded slightly to 14.8%. Total adjusted EBITDA exhibited a positive trend, increasing by 7% to $891 million. The adjusted EBITDA margin also expanded by 550 basis points to 25.8%.
Within the segment breakdown, Cable Network Programming EBITDA rose by 3.4% year over year to $819 million, while Television reported an adjusted EBITDA of $145 million, marking an impressive 23.9% increase from the previous year.
Financial Position and Market Performance
As of March 31, 2024, Fox Corporation held $3.79 billion in cash and cash equivalents, showing a slight decrease from the previous quarter. Long-term debt amounted to $7.19 billion, indicating a need for prudent balance sheet management moving forward.
Fox Corporation, currently holding a Zacks Rank #3 (Hold), has shown resilience in a tough market environment. Despite challenges, shares of FOXA have outperformed the Consumer Discretionary sector, boasting a gain of 11.8% year to date compared to the sector’s decline of 2.8%.
For investors seeking opportunities in the sector, other promising stocks include Manchester United, Netflix, and Hasbro, each carrying a Zacks Rank #1 (Strong Buy) endorsement. While each has its own unique attributes, these stocks present compelling investment opportunities within the market backdrop.
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