Twenty-First Century Fox (NASDAQ:FOX) (NASDAQ:FOXA) reported fourth-quarter earnings after Wednesday's market close, and delivered EPS results that were better than anticipated despite a revenue miss. The average analyst estimate as polled by Thomson Reuters called for quarterly revenue of $6.46 billion and earnings per share of $0.37, while actual sales for the period came in at $6.2 billion and earnings per share for the period were $0.39.
The performance comes amid heightened, industrywide worries over the future of cable. Prior to the earnings release, Fox shares sank as companies across the media industry saw their valuations slashed as Disney's quarterly reporting portended poorly for the health of cable television. Twenty-First Century Fox's shares fell Thursday on its own results, too.
Fox's fourth-quarter revenue fell from roughly $6.84 billion in the prior year to $6.2 billion in the 2015 period, representing a decline of approximately 9%. Earnings per share for the quarter of $0.39, while better than anticipated by the average analyst estimate, were down roughly 7% from $0.42 in the fourth quarter of fiscal 2014.
On the revenue side, much of the decline came from soft performance in the company's Filmed entertainment segment. Fourth-quarter sales in the segment fell from approximately $2.8 billion to approximately $1.9 billion, representing a year-over-year decline of roughly 32%. OIBDA in the Filmed Entertainment segment fell from $339 million to $269 million, a decline of about 21%. Relative to performance in 2014, Fox's movie division was hurt by the absence of a film that matched the draw of an X-Men release, with last summer's X-Men: Days of Future Past having grossed roughly $748 million.
Soft performance from the company's film wing was partially offset by performance of its Cable Network Programming segment, but the company's Television segment also lagged relative to performance in the prior year. Network Programming revenue increased roughly 7% year-over-year thanks primarily to increased affiliate rates, and segment OIBDA increased roughly 1% as increased expenses tied to sports programming costs limited gains. Revenues from the television segment fell roughly 4% year over year to $987 million, while OIBDA for the segment fell 22% year-over-year to $113 million. Combined adjusted OIBDA across Fox's segments decreased roughly 5% year-over-year to $1.54 billion.
What's next for Fox?
Improving performance at the Fox Network stands as one of the company's most important goals going forward, and the company has made clear that it plans to invest heavily to achieve that end. Acquisitions of studios and content licenses represent one potential way that the company might go about improving the health of the network. Fox has also stated that improving the overall viability of the network is a bigger priority than achieving strong near-term profit targets in the segment, which may suggest that the company will revise the mid-$7 billion EBITDA target for the 2016 fiscal year that it made half a year ago.
Fox has also been dealing with rising content production costs, with shows like Glee and Gotham requiring large budgets, however the company appears to view reducing expenses on this front as a losing proposition. Instead, Fox has previously indicated that it is focusing on securing more favorable distribution deals and online platforms as ways to offset risings costs.
While the strength of original programming at Fox is not where the company would like it to be, the company's position in sports looks to remain strong going forward. The company has secured World Cup coverage through 2026, as well as the U.S. Open through 2027, and strong demand for its regional sports networks suggest that these channels will continue to help the company. Increased advertising revenues for RSNs and Fox Sports 1 partially offset declines for FX in the fourth quarter.
On the film front, movies based on Marvel superheroes and sequels in the Avatar series look to be the company's biggest assets, but it's also looking to properties including The Maze Runner and Planet of the Apes to drive segment growth. Making better use of its superhero properties would enable the company to smooth out its film segment earnings and avoid big performance declines such as the one seen in the fourth quarter.
Like other media giants, Fox is looking to emerging markets including India and China to buoy performance, and success in international territories looks to be increasingly crucial in light of mounting concerns about the future of cable TV.
Keith Noonan has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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