Fox Says Strong Dollar to Reduce 2016 Profit; Shares Tumble

  • Headwinds to cut earnings growth by 6 percentage points
  • Film, TV company now projects slight growth this year

21st Century Fox Inc., Rupert Murdoch’s film and TV company, lowered its fiscal 2016 profit guidance, saying the strong dollar will reduce earnings by $350 million this year. The shares fell.

Profit for fiscal 2016 will be flat or increase only slightly, executives of New York-based Fox said on an conference call Monday after markets closed. The company had been forecasting growth of just under 5 percent in earnings before interest, taxes, depreciation and amortization.

Fox fell 5.8 percent to $23.16 in extended trading after Chief Financial Officer John Nallen made the projection on the call. The stock slumped 1.9 percent to $24.59 at the close in New York and has retreated 9.5 percent this year.

The reduced forecast highlighted the company’s vulnerability at a time when most of its businesses are performing well. Fox posted fiscal second-quarter profit that met analysts’ estimates, as growth in cable and broadcast television countered lower revenue from filmed entertainment. Through the first half of the fiscal year, the strong dollar has reduced profit by $220 million, Nallen said. Poor theatrical results are also contributing to the outlook, he said.

“Two main factors -- continued currency movement against us, and disappointing commercial results in the film business -- are simply too significant for us to offset over the next six months, to hit our original near-term target,” Chief Executive Officer James Murdoch said on the call.

Second-quarter profit excluding some items fell to 44 cents a share, New York-based Fox said Monday in a statement. That met the average of 28 analysts’ estimates compiled by Bloomberg. Revenue declined 0.7 percent to $7.38 billion in the period ended Dec. 31, short of analysts’ forecasts of $7.52 billion.

Fox benefited from higher advertising and affiliate revenue. That included gains at the struggling Fox broadcast network, which drew increased ad sales from entertainment programming like the hit show “Empire,” along with sports. During the quarter, the company battled currency headwinds that cut revenue by 3 percent.

  • Revenue from cable TV, the company’s biggest business, grew 9.4 percent to $3.7 billion
  • Broadcast TV revenue was $1.72 billion, up 5.7 percent
  • Sales in filmed entertainment slumped 14 percent to $2.36 billion.

While the film division enjoyed a box-office hit in the period with “The Martian,” results were held back by lower home-entertainment revenue and production spending on new television series, according to the company.

Fox Divisional ResultsYr. over yr.
change
U.S. Affiliate Revenue+10%
U.S. Cable Advertising+3%
Int’l Cable Advertising-1%
Int’l Affiliate Revenue+15%
Broadcast TV Advertising+4%
Filmed Entertainment-14%
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