Analysts at UBS said that Fox Corporation’s business is more resilient than its peers against a tough US media industry backdrop.
UBS currently has a Buy rating and 12-month $42 price target for Fox’s shares which traded around $32.20 on Monday afternoon.
“We expect F4Q results to show resiliency in Fox’s news and sports franchises. We are updating our cable estimates for higher industry cord cutting/softer ratings, but total EBITDA/FCF is largely unchanged,” UBS analysts said in a note to clients.
“We now look for 2.9% total affiliate growth in F4Q (3.3% prior), in-line with F3Q, while ad declines 6% (prior UBSe -5%) or UBSe -8% core ex Tubi/political. We expect EBITDA of $656M in F4Q, driving $3.1B for F23.”
However, the US-focused media company that operates cable networks, the Fox Broadcast network and Fox-affiliated local TV stations is likely to see cyclical pressure, according to UBS.
“We expect several cyclical catalysts to unwind in F24, driving a ~10% EBITDA decline to $2.8B (unch). This includes the impact of no political ad (UBSe ~$200M), no Super Bowl (UBSe <$100M) and higher sports costs (NFL ~$200M & Big 10 ~$100M), net of accelerating affiliate growth (2H weighted w/ the renewal cycle),” said the analysts.
“Despite the cyclical pressure in F24, we continue to believe FOX is better positioned than peers over the long-term given its sports/news exposure.”
Fox’s cable networks focus on programming national news (Fox News Channel, Fox Business Network) and sports (Fox Sports 1 and 2, and Fox Deportes). The broadcast segment focuses on national sports, local news and to a lesser extent entertainment programming.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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