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TheStreet Open House

21st Century Fox (FOXA) is the Machine That Keeps Growing

NEW YORK (TheStreet) -- Rupert Murdoch's film, cable-TV and broadcast conglomerate 21st Century Fox (FOXA) is growing faster-than-forecast as profitable acquisitions and increased affiliate fees padded the top-line, the New York-based entertainment company said Thursday.

In afternoon trading, shares had added 1.6% to $32.22.

For the three-month period ended in December, Fox's sales totaled $8.16 billion, a 15% increase from a year earlier. Higher sales were fueled by the inclusion of sales from Sky Deutschland AG. Fox took majority ownership of Sky Deutschland early last year. Fox's cable networks also bolstered sales with a 14% increase due largely from affiliate-fee revenue growth.

"We continued to deliver top-line revenue growth across our businesses, including double-digit increases in affiliate fees and retransmission consent revenues as well as the inclusion of Sky Deutschland results," said chairman and CEO Murdoch in a statement.

Profitability, though, was far lower than a year earlier. In the December-ended quarter, its second since splitting from publishing company News Corp  (NWSA), the company earned $1.21 billion, 49% lower than the year-ago quarter. Operating income before depreciation and amortization (OIBDA) took a hit on increased capital expenditures.

"Our quarterly OIBDA results ... reflect the planned investments we are making in our core businesses to support long-term growth," said Murdoch.

Excluding one-time charges, net earnings came in at 33 cents a share, a penny short of consensus according to Thomson Reuters estimates.

In its cable network, expenses increased 22%, the result of the channel launches of Fox Sports 1, STAR Sports in India, and FXX. Broadcast TV also saw declining profitability as a result of lower political advertising and falling ratings for primetime shows such as X-Factor.

Last month, the company entered into an agreement to acquire an additional 31% interest in the YES Network for $680 million, giving Fox an 80% controlling interest. The deal is expected to close by the end of the March-ending third quarter, subject to regulatory approval. Fox will also finance $160 million additional upfront costs on YES' behalf and take on $1.7 billion of the network's debt.

TheStreet Ratings team rates TWENTY-FIRST CENTURY FOX INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate TWENTY-FIRST CENTURY FOX INC (FOXA) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, reasonable valuation levels, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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