On Monday, Fox Corp. (NASDAQ:FOX) experienced an upgrade in stock rating from 'Sell' to 'Hold' by a CFRA analyst, with a new price target set at $46.00, an increase from the previous $38.00. The adjustment comes after the company reported a notable performance in the September quarter, prompting the analyst to revise the full-year earnings per share (EPS) estimates for fiscal years 2025 and 2026.
The analyst has raised the EPS forecast for fiscal year 2025 to $4.50, up by $0.70, and for fiscal year 2026 to $4.40, also a $0.70 increase. The 12-month price target was lifted by $8 to $46, based on a forward total enterprise value to earnings before interest, taxes, depreciation, and amortization (TEV/EBITDA) multiple of 7.4 times, which is close to the peer average of 7.7 times.
Fox Corp. reported earnings per share of $1.78 for the September quarter, surpassing the consensus estimate of $1.13. The revenue beat by 5.6% was driven by heightened activity in the election news cycle and live sports broadcasting. The company's adjusted EBITDA saw a 12% increase, supported by strong performances in cable network programming and television.
The revenue breakdown for the company showed that affiliate fees, which constitute 52% of total revenue, increased by 5.9%, advertising revenues grew by 10.8%, making up 37% of the total, and other revenues jumped by 46.8%, accounting for 11%. Tubi, Fox's free advertising-supported streaming service, also experienced significant growth, although specific figures were not fully disclosed.
Fox Corp. reported a healthy financial position with cash and cash equivalents totaling $4.1 billion and a debt of $7.2 billion. The company generated free cash flow (FCF) of $0.94 million after allocating $250 million for share repurchases and paying out $135 million in dividends. The robust advertising revenues were highlighted by FOX Sports, which benefited from the NFL, MLB, and college football broadcasts. The company is also actively pursuing sports bundling arrangements with other streaming partners.
In other recent news, Fox Corp has reported strong Q1 revenue, surpassing Wall Street's expectations. This performance is largely attributed to a surge in political advertising ahead of the recent U.S. presidential election. The company's Q1 advertising revenue rose by 11%, reaching $1.33 billion, outperforming the average analyst estimate of $1.13 billion. The television segment played a significant role in this success, recording revenues of $1.95 billion.
In addition, Fox's Cable Network (LON:NETW) Programming division reported revenue of $1.60 billion, exceeding analysts' projection of $1.41 billion. The company's total quarterly revenue was $3.56 billion, higher than the expected $3.37 billion. On an adjusted basis, earnings were $1.45 per share, also above the anticipated $1.11 per share.
InvestingPro Insights
Fox Corp.'s recent upgrade and strong financial performance are further supported by key metrics from InvestingPro. The company's P/E ratio of 12.4 suggests it's trading at a relatively low valuation compared to its earnings, which aligns with the CFRA analyst's positive outlook. This is reinforced by an InvestingPro Tip indicating that Fox is trading at a low P/E ratio relative to near-term earnings growth.
Additionally, Fox's dividend policy appears robust, with an InvestingPro Tip noting that the company has raised its dividend for 4 consecutive years. The current dividend yield stands at 1.29%, with a dividend growth of 8% in the last twelve months, demonstrating Fox's commitment to shareholder returns alongside its share repurchase program.
The company's financial health is also highlighted by another InvestingPro Tip, which states that Fox's liquid assets exceed short-term obligations. This corroborates the article's mention of Fox's healthy financial position with substantial cash reserves.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Fox Corp., providing a deeper understanding of the company's financial landscape and potential investment opportunities.
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