By Keach Hagey and Tess Stynes
21st Century Fox Inc. lowered its fiscal year earnings guidance
on Monday, citing a disappointing film slate and a
greater-than-expected hit from foreign currency fluctuations.
The reduced outlook was disclosed along with a drop in revenue
for the quarter ended Dec. 31, as lower movie revenue offset
stronger cable and television advertising sales.
The company, which owns cable channels Fox News and FX, the Fox
broadcast network and Twentieth Century Fox studio, said it expects
the percentage change in its earnings before interest, taxes,
depreciation or amortization to be "flat or up low single digits"
for its fiscal year ending in June.
Its previous forecast--set in August, when it expected the
strong dollar would hurt Ebitda by $200 million for the
year--called for Ebitda percentage growth in the "mid-single-digit
range" compared with the year earlier. On Monday, it raised the
full-year's expected currency hit to about $350 million, compounded
by the underperformance of most of its films so far aside from "The
Martian."
"We are confident that the business is really on track to
support our long-term objectives," James Murdoch, chief executive
of 21st Century Fox, said on a call with analysts. "However, two
main factors--the continued currency movement against us and
disappointing commercial results in the film business--are simply
too significant for us to offset over the next six months to hit
our near-term target."
It was the third time in five quarters that Fox was forced to
lower its earnings guidance. It made similar adjustments in
February and August of last year. In November, the company said it
would no longer be giving specific annual earnings targets after
this fiscal year.
The stock dropped 4.4% in late trading after finishing off 48
cents at $24.59 in 4 p.m. Nasdaq trading. Fox reported its fiscal
second-quarter results after U.S. markets closed.
Revenue for the quarter fell to $7.38 billion from $8.06 billion
a year earlier. The year-earlier quarter included $631 million of
revenue from Sky Italia and Sky Deutschland, which were sold in
November 2014. Excluding revenue from those direct broadcast
satellite businesses, revenue fell 1%. Analysts polled by Thomson
Reuters had expected revenue of $7.51 billion.
Executive co-Chairmen Rupert Murdoch and Lachlan Murdoch said
the cable business continued to drive growth in the latest quarter,
delivering sustained increases in domestic affiliate fees and
growth in advertising revenue.
The senior Mr. Murdoch split his media empire in 2013, with the
entertainment assets going to 21st Century Fox and the publishing
assets, including The Wall Street Journal, going to News Corp.
Cable network division revenue increased 9.4% to $3.7 billion.
Domestic affiliate revenue improved by 10% and domestic advertising
revenue grew 3%.
Its television revenue increased 5.7% to $1.72 billion amid
strong retransmission consent revenue growth and a 4% increase in
advertising revenue.
Its film studio business fell 14% to $2.36 billion, mostly on
lower world-wide DVD sales reflecting a tough comparison to last
year's strong performance of "X-Men: Days of Futures Past" and
"Dawn of the Planet of the Apes" compared with this year's home
entertainment performance of "Spy" along with the absence of Shine
Group.
The company also reported higher losses from streaming media
service Hulu in the quarter, though it didn't break out specific
numbers.
Overall, 21st Century Fox reported a profit of $672 million, or
34 cents a share, down from $6.21 billion, or $2.88 a share, a year
earlier. The year-earlier profit was boosted by certain one-time
items, and excluding those, per-share earnings from continuing
operations fell to 44 cents from 53 cents. Analysts expected
per-share profit of 44 cents.
The Wall Street Journal reported last week that the media
company was seeking to trim annual expenses by $250 million--
mostly through voluntary buyouts, for the current fiscal year that
ends in June. If the television group and movie studio doesn't meet
its targets through voluntary buyouts, job cuts would be possible,
the Journal reported. The company's earnings report didn't include
any further details about its cost-cutting efforts.
The cost-cutting plan comes amid sweeping changes in the media
landscape in which viewers have far more options beyond the small
screen and the movie theater, changing the way audiences pay for
and consume entertainment and news.
Last summer, Fox completed a transition that put the senior Mr.
Murdoch's sons at the helm of the media conglomerate, which
includes the Fox broadcast network, cable channels in the U.S. and
around the world, and one of the largest film and television
studios. In September, Fox struck a deal to add National Geographic
magazine and other assets to its media properties.
In July, Mr. Murdoch officially stepped down as chief executive
of 21st Century Fox, handing the title to his son James. The elder
Mr. Murdoch stayed on as executive chairman at Fox. His older son,
Lachlan, was named executive co-chairman.
Write to Keach Hagey at keach.hagey@wsj.com and Tess Stynes at
tess.stynes@wsj.com
(END) Dow Jones Newswires
February 08, 2016 19:30 ET (00:30 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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