Fox Corp Beats Earnings Expectations as Ad Revenue Shows Signs of Life, But Challenges Remain
Fox Corp FOXA reported a strong fourth-quarter 2024, exceeding earnings estimates while revenues narrowly missed expectations. While the company highlights a rebound in advertising revenue, fueled by the upcoming presidential election and the Super Bowl, it also faces challenges like declining ratings at the Fox Network and the ongoing impact of the writers’ and actors’ strikes.
Key Takeaways:
- Earnings Beat: Fox Corp posted adjusted net income of $423 million, surpassing analyst estimates of $0.81 per share.
- Revenue Miss: Revenue reached $3.09 billion, falling short of expectations of $3.10 billion.
- Affiliate Fee Growth: Affiliate fee revenues increased by 5%, driven by a 9% growth in the Television segment, primarily due to increased fees at the Fox Broadcast Network and cable division, led by Fox News.
- Advertising Uptick: Although advertising revenues remained consistent with the previous year, Fox CEO Lachlan Murdoch indicated that the ad business is showing signs of improvement, buoyed by the upcoming presidential election and the Super Bowl.
- Sports Spending Continues: Fox continues to invest in sports, with Murdoch expressing enthusiasm for the launch of the Venu streaming sports bundle, targeting millions of subscribers.
- Entertainment Spending Rise: Despite cost-savings from last year’s strikes, Fox CFO Steven Tomsic indicated that spending on entertainment will increase in the upcoming year.
Advertising Gains but Challenges Remain
While Fox’s advertising business is showing a positive trajectory, the company still faces challenges. The decline in ratings and pricing at the Fox Network offset the gains brought in by the "Summer of Soccer," which included the UEFA European Championship and CONMEBOL Copa América broadcasts.
Despite these headwinds, Fox is positioning its media assets well for the upcoming presidential election, which is expected to drive increased advertising revenue at Fox News and local TV stations. The company also anticipates strong advertising revenue from the 2024 Super Bowl.
Fox News and Sports Segment Performance
Murdoch expressed satisfaction with the performance of Fox News, citing its steadily rising viewership despite cost reductions compared to last year.
The company is also looking to bolster its sports content with the launch of the Venu streaming sports bundle, which aims to attract millions of subscribers by offering a more affordable option for accessing live sports content.
The Impact of the Strikes
While the strikes provided cost-savings for Fox in the past year, the company expects that entertainment spending will rise in the next fiscal year. This is due to the need to catch up on production schedules and potentially make up for lost revenue from projects delayed due to the strike.
What to Watch for in the Future
Fox Corp’s future trajectory will heavily depend on its ability to capitalize on the advertising opportunities presented by the upcoming presidential election and Super Bowl. The success of the Venu streaming sports bundle, along with the company’s ability to navigate the challenges posed by declining network ratings and rising entertainment spending, will also play a key role in determining its overall growth.
Investors will be closely watching how Fox Corp manages its investments in sports, entertainment, and news, and how it positions itself in the ever-evolving media landscape. The company’s ability to adapt and innovate will be crucial in ensuring its continued success.
