UPDATED with details from the investor call: 21st Century Fox fell short of Wall Street’s earnings expectations for its third quarter, as broadcast television and film units reported declines from a year ago.
The company reported per-share adjusted earnings of 49 cents, shy of consensus analyst estimates of 53 cents a share. Revenue for Fox’s March quarter reached $7.42 billion, exceeding analyst forecasts of $7.4 billion but representing a 2% decrease from a year ago.
The television group saw its operating income fall a precipitous $112 million to $78 million in the quarter, a decline that reflects the absence of Super Bowl ad revenue from a year ago. Executive Chairman Lachlan Murdoch touted the performance of 9-1-1, the freshman series about first responders, and returning shows Empire and Star, and said he is looking forward to unveiling next season’s schedule at Monday’s Upfront presentation.
The film group’s operating income also sagged to $286 million, a 23% decrease from the $373 million reported in the prior year quarter. Theatrical revenues from the worldwide release of its holiday slate including The Greatest Showman, 3 Billboards Outside Ebbing, Missouri and Oscar-winning The Shape of Water were similar to a year ago, Fox said. However, the results were impacted by costs related to the production of new drama series and the lack of on-demand streaming revenues from The People v. O.J. Simpson: American Crime Story. Costs related to FoxNext Games’ inaugural mobile game release, Marvel Strike Force, were also included in the results.
Fox’s cable business was a bright spot, with operating income of $1.68 billion for the quarter, up 16% from a year ago. FX network drama The Assassination of Gianni Versace: American Crime Story and the Donald Glover comedy Atlanta were two shows Murdoch identified as performing well.
“Our cable segment delivered its highest earnings ever in our fiscal third quarter, propelled by sustained double-digit gains in domestic affiliate revenues,” said Executive Chairmen Rupert and Lachlan Murdoch. “Creatively, we are firing on all cylinders. Our stand-out programming continues to drive up the value of our video brands to distributors, as well as build our direct relationship with consumers, as we’re demonstrating with the successful inaugural season of Indian Premiere League on STAR Sports and Hotstar platforms.”
Fox reported its results as news accounts suggest its film and television assets may be the object of a bidding war. The company’s board approved Disney’s $52.4 billion all-stock offer for significant parts of the compan, including its film and television studios, cable channels National Geographic and FX, and its regional sports networks.
Disney chairman Bob Iger expressed confidence that the deal would close in a call yesterday to discuss its financial results with investors. However, Comcast may scramble those plans. The cable operator is making preparations for a hostile bid for the Fox assets and has been lining up finances to make an all-cash offer, sources say.
Comcast is said to be awaiting the outcome of the Justice Department’s antitrust suit seeking to block the proposed merger of AT&T and Time Warner.
Fox shares fell nearly 1% on the day to close at $37.70. They have been essentially flat in 2018 after surging 35% in the fourth quarter of 2017.