Fox Q4 Sales Down Sharply From Previous Quarter On COVID-19 Advertising Impact

Fox Corp. on Tuesday reported total sales of $2.42 billion last quarter, in line with expectations, down slightly (4%) from a year ago but off $1 billion from the previous three months as COVID-19 hit advertising.

The company that owns Fox News, Fox Sports, Fox Entertainment and the Fox Television Stations had warned a major squeeze was coming with stations expected to be down 50%.

Net income for Fox’s fourth quarter decreased to $145 million from $165 million in the prior-year quarter due to higher impairment and restructuring charges.

Excluding items, Fox reported adjusted earnings of $375 million or $0.62 per share for the period.

Last quarter, the company’s fiscal third, Fox ad revenue jumped 25% to $3.44 billion, beating estimates, as ad revenues swelled 44% on Super Bowl LIV and there were just a few weeks of pandemic-related disruption. Fox’s fiscal year ends in June.

“Fox delivered strong results for the fourth quarter and full fiscal year, even in spite of the unprecedented environment in which we all continue to operate, underscoring the strength of our brands and content offering. We continue to expand the way audiences interact and connect with our brands while simultaneously diversifying and enhancing our revenue base. We entered the COVID-19 crisis on sound operational and financial footing and we expect to emerge from this pandemic more competitive, more focused and even more strongly positioned to deliver value for our viewers, partners and shareholders in the years ahead,” said CEO Lachlan Murdoch.

Analysts tend to like Fox. Alan Gould of Loop Capital recently upgraded the company to a buy and raised his price target calling it “well positioned as predominantly a news and sports company with two of the top five TV channels that every distributor effectively must carry. Fox News drives profits and is holding up better than any traditional media property, he said, and he doesn’t think an eventual NFL renewal will not depress earnings as much as the Street has forecast. Fox is set to benefit from political advertising this fiscal year, “sports appear to be returning, sports betting should begin to benefit, expectations are low, and the valuation is compelling.”

Television reported quarterly segment revenues of $1.11 billion, a decrease of $70 million or 6% from the amount reported in the prior-year quarter, as lower advertising revenues were partially offset by higher affiliate and other revenues.

Cable Network Programming reported quarterly segment revenues of $1.27 billion, a decrease of $28 million or 2% from the amount reported in the prior year quarter, as lower advertising and other revenues were partially offset by higher affiliate revenues. Advertising revenues decreased $22 million or 8%, primarily due to the postponement of live events at FS1 as a result of COVID-19, partially offset by higher advertising revenues at Fox News Media. Other revenues decreased $15 million or 31%, primarily due to lower revenues at Fox Sports as a result of COVID-19, partially offset by higher revenues at Fox News Media. Affiliate revenues increased $9 million or 1% as contractual price increases, including the impact of distribution agreement renewals, were partially offset by net subscriber declines.

Television reported quarterly segment revenues of $1.11 billion, a decrease of $70 million or 6% from the amount reported in the prior year quarter, as lower advertising revenues were partially offset by higher affiliate and other revenues.

Advertising revenues decreased $184 million or 29%, primarily as a result of COVID-19, partially offset by the consolidation of Tubi. The COVID-19 impact included a weaker local advertising market at the Fox Television Stations, the postponement of live events at Fox Sports and lower ratings due to fewer hours of scripted programming at Fox Entertainment. Affiliate revenues increased $100 million or 22% due to increases in fees from third-party Fox affiliates and higher average rates per subscriber, partially offset by net subscriber declines at the company’s owned and operated television stations. Other revenues increased $14 million or 13%, primarily reflecting the consolidation of Bento Box Entertainment, partially offset by lower digital licensing revenues.

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