FOXA Financial Analysis

Analysis Date: 2/5/2025

Business Model

Fox Corporation generates revenue through affiliate fees, advertising, and other revenues. Affiliate fees are derived from cable network programming and television segments. Advertising revenue is generated across cable networks, television stations, and digital platforms like Tubi. Other revenues include sports sublicensing and content revenues.

Revenue Sources

• Affiliate Fees: Charges to cable, satellite, and streaming distributors for the right to carry Fox's channels (Cable Network Programming and Television segments).
• Advertising: Sale of advertising time across Fox News, Fox Sports, broadcast television, and Tubi.
• Other Revenues: Sports sublicensing, content production revenues, and other miscellaneous items.

Income Statement Analysis

• Revenue increased significantly by 20% year-over-year, driven by growth in affiliate fees, advertising, and other revenues. (Pro)
• Operating expenses increased by 11.3%, but at a slower rate than revenue growth, indicating improved operating leverage. (Pro)
• Selling, general, and administrative expenses saw a moderate increase of 6.1%. (Neutral)
• Restructuring, impairment and other corporate matters increased significantly, potentially impacting profitability. (Con) - However, context is needed to understand the nature of these matters.
• Net income attributable to Fox Corporation stockholders increased dramatically by 242.2% year-over-year, indicating strong profit growth. (Pro)

Balance Sheet Analysis

• Cash and cash equivalents decreased by 23.1%, which could be due to investments or operational uses of cash. (Con) - Needs further investigation into cash flow statement.
• Receivables and Inventories increased significantly, by 47.7% and 87.1% respectively, which might indicate increased sales or buildup of inventory. (Neutral) - Needs correlation with revenue and sales trends.
• Total assets increased by 4.8%, driven by the increase in current and other non-current assets. (Pro) - Indicates company growth.
• Retained earnings increased significantly by 25.8%, reflecting the profitability during the period. (Pro) - Directly linked to strong net income.
• Total equity increased by 7.4%, indicating an increase in the net worth of the company. (Pro)

Capital Allocation

Fox Corporation is actively returning capital to shareholders through share repurchases and dividends. In Q2 FY25, they repurchased approximately $250 million of Class A common stock, and year-to-date, they have repurchased $550 million. They also announced a semiannual dividend of $0.27 per share. Management mentioned commitment to utilizing the full buyback authorization of $7 billion. This indicates a shareholder-friendly capital allocation strategy with a focus on returning value.

Management Commentary

Fox EBITDA more than doubled year over year to a 2nd quarter record of $781,000,000 driven by revenue growth of 20%.

Total affiliate revenue grew by 6% on the back of higher rates with subscriber declines improving for the 2nd consecutive quarter.

Total company advertising growth of 21% in the quarter was driven in part by record political revenue led by our local stations.

Tubi was a strong contributor to advertising revenue growth in the quarter, achieving a 31% increase in ad revenues.

Our only disappointment in sports is that we will not be moving forward with Venue, our sports streaming joint venture.

Overall Sentiment: Positive. Management expresses strong confidence in the company's performance, highlighting record EBITDA and revenue growth, strong advertising and affiliate revenue, and the success of Tubi. While there was disappointment regarding the Venue joint venture, the overall tone is optimistic about the current performance and future prospects.

Recommendation

Rating: Buy

Reason for Rating: Based on strong Q2 FY25 financial results, driven by significant revenue and EBITDA growth, improved affiliate revenue trends, and robust advertising performance, particularly in political and digital segments like Tubi, a Buy recommendation is warranted. The company is effectively monetizing its content portfolio and returning value to shareholders through dividends and share repurchases.

Disclaimer: This analysis is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/5/2025, 3:57:50 AM