Bloomberg News

Fox Surges on Profit Gains Led by Film, Cable Units

August 07, 2014

21st Century Fox Inc., the film and TV company led by Rupert Murdoch, rose after reporting profit that topped analysts’ estimates and saying it’s in no rush to do deals after dropping a $75 billion bid for Time Warner Inc. (TWX:US)

“I wouldn’t say never, but we have no plans to go out on the acquisition trail,” Murdoch, 83, said yesterday on a conference call with analysts and investors.

Fox, based in New York, advanced 5 percent to $33.96 at the close in New York, the biggest gain since May. The Class A shares are down 3.4 percent this year.

With the bid over, Fox executives highlighted record profit from films and gains in cable programming. Box-office sales from “X-Men: Days of Future Past” and “Rio 2,” along with the addition of the YES Network, helped overcome a tough climate for cable ads and Fox Broadcasting’s struggle to develop hits to succeed the fading “American Idol.”

Fourth-quarter profit excluding items rose to 42 cents a share from 31 cents a year earlier, Fox said yesterday in a statement. Analysts anticipated 39 cents, the average of 18 estimates. Revenue grew 17 percent to $8.42 billion in the period ended June 30, beating projections (FOXA:US) of $8 billion.

Murdoch, who is chairman and chief executive officer Rupert Murdoch, called the Time Warner decision “resolute,” and said Fox is a “strategically complete company” that doesn’t need to hunt for acquisitions.

BSkyB Deal

On Aug. 5, Fox withdrew its $85-a-share offer for Time Warner, owner of the HBO and TNT cable channels and the Warner Bros. film studio. At the same time, Murdoch’s company announced a $6 billion stock buyback authorization.

“We are done,” Chase Carey, Fox’s president and co-chief operating officer, said of Time Warner on the call.

Last month, Fox agreed to sell its Sky Italia and Sky Deutschland holdings to its 39 percent owned affiliate, British Sky Broadcasting Group Plc, for more than $9 billion, consolidating European satellite TV assets there.

“We are quite pleased with our 39 percent ownership in this platform and have no plans today to change that position,” Carey said. “Our focus will be on helping the platform achieve its full potential.”

Fourth-quarter operating income before depreciation and amortization grew 19 percent to $1.77 billion, the company said.

Cable division profit, from networks such as the Fox News Channel and FX, as well as regional sports outlets, rose 11 percent to $1.2 billion, fueled by a 19 percent gain in payments from domestic pay-TV systems. U.S. ad sales grew 12 percent, the company said, including the consolidation of results from YES Network. International ads grew 5 percent.

Cable Contribution

“The contribution from the cable networks was a little bit less than I was looking for,” said Barton Crockett, an analyst at FBR Capital Markets who recommends the stock. “The currency headwinds in the cable networks look to be pretty pronounced.”

The film division posted record fourth-quarter operating profit of $339 million, almost triple the year-earlier result, Fox said, while revenue increased 38 percent.

With the sale of the satellite assets to BSkyB, Fox lowered its forecast for fiscal 2016 cash flow, or earnings before interest, tax, depreciation and amortization, to $8.1 billion from $9 billion.

Last year, Murdoch split off the slower-growing News Corp. publishing business from his film and TV operations. The print-media business includes the Wall Street Journal and the New York Post.

To contact the reporter on this story: Anousha Sakoui in London at asakoui@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net Rob Golum


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Companies Mentioned

  • TWX
    (Time Warner Inc)
    • $84.33 USD
    • -0.04
    • -0.05%
  • FOXA
    (Twenty-First Century Fox Inc)
    • $38.33 USD
    • 0.58
    • 1.51%
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