Key Factors Affecting 21st Century Fox (FOXA) Q3 Earnings

Twenty-First Century Fox (NASDAQ:FOXA) is expected to release third-quarter fiscal 2018 results on May 9.

The company has agreed to sell Twentieth Century Fox, Fox Searchlight, Fox 2000, FX Networks, Fox Sports Regional Networks, Fox Networks Group International, Star India, and 21st Century Fox’s interests in National Geographic Partners, Hulu, Sky, Tata Sky and Endemol Shine Group to The Walt Disney Company (NYSE:DIS) .

Moreover, Twenty-First Century Fox plans to spin-off Fox News Channel, Fox Business Network, Fox Broadcasting company, Fox Sports, Fox Television Stations Group, and sports cable networks FS1, FS2, Fox Deportes and Big Ten Network (BTN) into a new “Fox”. The new company will also include Twenty-First Century Fox’s studio lot in Los Angeles and equity investment in Roku.

Moreover, the company is also bidding for the remaining shares of Sky Plc (LON:SKYB), which it anticipates to wrap up by Jun 30, 2018.

However, bidding war between the company and Comcast (NASDAQ:CMCSA) is expected to intensify as the cable giant recently submitted a $31-billion offer for Sky.

Earnings History & Q3 Trend

Twenty-First Century Fox has beaten the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 9.28%.

In the last reported quarter, the company delivered earnings of 42 cents per share that beat the Zacks Consensus Estimate by 6 cents. However, the figure declined 20.8% on a year-over-year basis.

Meanwhile, net sales have outpaced the consensus mark in three of the trailing four quarters. In the last reported quarter, net sales increased 5% year over year to $8.04 billion, which comfortably surpassed the Zacks Consensus Estimate of $7.97 billion.

The Zacks Consensus Estimate for third-quarter earnings has remained steady at 52 per share over the last seven days, reflecting year-over-year decline of 3.7%. The consensus mark for revenues currently stands at $7.31 billion, reflecting year-over-year decline of 3.3%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Twenty-First Century Fox’s Cable Network Programming segment is expected to benefit from rising affiliate fees. Management anticipates domestic affiliate fee to increase at least in high-single digit in all the quarters of fiscal 2018.

The Zacks Consensus Estimate for Cable Network Programming revenues stands at $4.36 billion, up 8.4% from the year-ago quarter.

However, weakness in Filmed Entertainment and Television segments are expected to hurt top-line growth in the to-be reported quarter.

The Zacks Consensus Estimate for Filmed Entertainment revenues currently stands at $2.21 billion, down 2% from the year-ago quarter. Moreover, the consensus mark for Television segment is currently pegged at almost $1.30 billion, down 23.4% year over year.

Moreover, significant increase in global sports programming cost at Cable Network Programming has been worrying investors. Television profitability is also expected to hurt from an increasing contractual sports programming costs at the FOX Broadcast Network.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

We believe that Twenty-First Century Fox is unlikely to deliver a positive earnings surprise in the first quarter due to an unfavorable combination of a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stock That Warrants a Look

Here is a stock that you may want to consider as our model shows it has the right combination of elements to deliver an earnings beat in its upcoming release.

Nice (NASDAQ:NICE) has an Earnings ESP of +0.75% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>