Fox Corp. "Best Positioned" Media Firm Amid TV Ad Crisis, S&P Global Forecasts

Rupert and Lachlan Murdoch - H - 2017

The finance firm notes that the media conglomerate "could end fiscal year 2020 with $4.6 billion of cash on its balance sheet."

Amid the novel coronavirus pandemic, Fox Corp. — the slimmed-down media firm that emerged from the $71.3 billion sale of 21st Century Fox assets to Disney — has been given a stable rating from S&P Global. 

The company, comprised of Fox News, Fox Sports and Fox Entertainment, as well as local TV stations, "may be the best positioned of its pure media peers to weather the pandemic due to its conservative financial policy," the research firm said Wednesday in an advisory.

"Fox's healthy cash flow generation and significant cash balances should allow it to counter the decline in its EBITDA. We expect the company to generate $1.7 billion in annual free cash flow in both fiscal years 2020 and 2021," S&P Global forecast, adding: "Fox could end fiscal year 2020 with $4.6 billion of cash on its balance sheet before increasing to over $5.0 billion as of the end of fiscal year 2021."

Fox Corp. on March 31 disclosed that ratings for Fox News had risen amid the crisis but that "COVID-19 could have a material adverse effect on the company’s business, financial condition or results of operations over the near to medium term," citing its production halt and broadcast cancellations. (National channel Fox Sports 1, for example, has rights to MLB — which has indefinitely postponed its season — as well as NASCAR and USGA events.)

On April 2, Guggenheim Securities analyst Michael Morris upgraded his Fox Corp. rating from "neutral" to "buy," similarly noting that "Fox is best positioned among peers in a weaker, but ultimately stable consumer environment."

Total quarterly revenue for Fox Corp. rose to $3.78 billion for the three months ahead of Dec. 31, 2019, the company disclosed Feb. 5. Since then, Fox acquired the ad-supported streamer Tubi for $440 million in cash and sold its stake in the streaming media player Roku.

Added S&P Global in its Wednesday advisory, "Fox's historically conservative financial policy supports our 'BBB' rating because it allowed the company to maintain low leverage for the rating at the onset of the pandemic."