21st Century Fox Stock Falls 3 Percent on Weak Earnings

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Rupert Murdoch

The company controlled by Rupert Murdoch beat revenue expectations but not earnings-per-share projections, and the stock sinks in after-hours trading.

21st Century Fox reported fiscal first-quarter earnings on Tuesday that beat the expectations of analysts on the top line though not the bottom line.

The entertainment conglomerate controlled by Rupert Murdoch said earnings-per-share in the most recent quarter was 33 cents on revenue of $7.06 billion. Analysts were expecting 35 cents per share on about $6.8 billion in revenue.

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21st Century Fox separated from News Corp. in June. Since the split, shares of 21st Century Fox are up 27 percent compared with a 10 percent gain for the S&P 500.

On Tuesday, though, the stock was down fractionally to $34.09 and off as much as 3 percent after the closing bell when earnings were released.

The company suggested the lightness on an earnings-per-share basis could be attributed to currency fluctuations and money spent to launch FXX and Fox Sports 1.

During a conference call with analysts to discuss earnings, COO Chase Carey said Fox Sports 1, meant to compete with Walt Disney's ESPN, and FXX, a channel aimed at young men, have each experienced "mixed" ratings. He called each entity a "work in progress" but said that they were "on track for what we planned."

Had 21st Century Fox existed as a separate company in the year-ago quarter, it would have reported adjusted income of 38 cents per share.

Analysts were expecting the dropoff in profit due to the lack of political advertising this time around and because American Idol ratings have been declining. Plus, the film unit faced difficult comparisons due to the success a year ago of Ice Age: Continental Drift.

The company's biggest reporting unit, cable network programming, reported revenue of $2.8 billion, up from $2.5 billion a year ago. Advertising revenue at the Fox News Channel was down compared to a year ago when a presidential election boosted viewership, but growth in ad revenue was seen at FX Networks, National Geographic Channels and the regional sports networks.

The company's next biggest segment, filmed entertainment, showed revenue of $2.1 billion, up from $1.9 billion, with the slight gain attributed to The Wolverine and The Heat, as well as pay TV revenue from Taken 2 and LIfe of Pi. The syndication of Modern Family, which 21st Century Fox includes within its filmed entertainment category, also helped increase revenue as did selling the first two seasons of New Girl to Netflix.

In the direct broadcast satellite TV segment, 21st Century Fox said revenue was $1.4 billion, up from $828 million. 

The television segment saw revenue of $1.05 billion, up from $972 million with strength in NFL games offsetting weakness with X Factor.

The category of "other" sapped $307 million from the company's overall revenue.

During the conference call Tuesday, Carey said he expects the Fox television network to wring more money from cable and satellite providers.

"We think the value of our broadcast signal is still undervalued in the marketplace today," he said.

After the earnings report, Vijay Jayant, an analyst with International Strategy & Investment, reiterated his "strong buy" outlook on the stock and his $38 price target. "We think 21st Century Fox will have the best three-year growth rate in the sector, but there are investments in the intermediate term needed to drive that growth," Jayant said.