Fox beats quarterly estimates, boosts buyback by $5 billion

Fox Corp (FOXA.O) surpassed fourth-quarter revenue and profit estimates, reporting $3.29 billion in revenue and $1.27 EPS, driven by robust advertising growth, notably from its Tubi streaming service, and increased affiliate fees. The company also boosted its share repurchase authorization by $5 billion. This strong performance, coupled with strategic initiatives like the upcoming Fox One subscription service launch and the acquisition of Caliente TV, underscores Fox's successful expansion into digital and ad-supported streaming, positioning it for continued growth amidst evolving media consumption.

Analysis

Fox Corp. delivered a significant fiscal fourth-quarter outperformance, reporting total revenue of $3.29 billion, a 6.3% year-over-year increase that surpassed LSEG estimates of $3.12 billion. Adjusted earnings were also robust at $1.27 per share, well ahead of the 99-cent consensus. This performance was underpinned by broad-based strength, with advertising revenues growing 7.1% and affiliate fees rising 2.6%. Notably, the growth in advertising was driven by the continued expansion of its ad-supported streaming service, Tubi, and strong news ratings, successfully offsetting challenging year-ago comparisons from major sports events. The company's cable network programming unit demonstrated resilience amid industry-wide cord-cutting, with revenue increasing nearly 7% to $1.53 billion. Management is complementing this operational strength with aggressive strategic initiatives, including a $5 billion expansion of its share repurchase authorization, the planned launch of a premium subscription service 'Fox One', and the acquisition of Caliente TV to bolster its sports presence in Mexico.

Key Decisions for Investors

• The combination of a significant earnings beat, a $5 billion increase to the share buyback program, and strong performance in the digital ad-supported segment via Tubi strengthens the bullish case for the stock.
• Investors should closely monitor the subscriber adoption and pricing power of the new 'Fox One' subscription service launching August 21, as its success is a key catalyst for diversifying revenue streams beyond advertising.
• While current results are strong, continued outperformance hinges on executing its digital strategy; therefore, tracking Tubi's growth trajectory and its competitive positioning in the ad-supported streaming market remains critical.