21st Century Fox Inc. reported quarterly profit that topped analysts’ estimates, helped by the performance of its film and cable TV divisions, one day after dropping its $75 billion bid for Time Warner Inc.
Chairman and Chief Executive Officer Rupert Murdoch, on a conference call with investors yesterday after the earnings release, called the Time Warner decision “resolute,” and said Fox is a “strategically complete company” that doesn’t need to hunt for acquisitions.
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 at Murdoch’s entertainment business rose to 42 cents a share from 31 cents a year earlier, New York-based 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 of $8 billion.
“TV was especially weak, which speaks to how important ‘American Idol’ is,” said Brett Harriss, a Gabelli & Co. analyst who recommends the stock. “Their cable ad number was very strong.”
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 on the call. “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. International ads grew 5 percent.
“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.
Fox rose 3.7 percent to $33.54 yesterday in extended trading and advanced as high as $33.90 after the results were announced. The Class A stock gained 3.3 percent to $32.33 at the close in New York, after Fox dropped its cash-and-stock Time Warner bid. The Murdoch family controls Fox through its 39 percent ownership of the Class B voting stock.
Last year, Murdoch, 83, 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.