Fox Gives Media Stocks a Lift as Cable Business Boosts Profits

(Bloomberg) -- 21st Century Fox Inc., the film and TV company controlled by Rupert Murdoch, led gains among media stocks after posting first-quarter profit that exceeded analysts' estimates, fueled by growth in its cable-network business.

Fox shares jumped as much as 7.8 percent in New York, the biggest intraday gain in more than two years. Walt Disney Co., Viacom Inc. and CBS Corp. also jumped more than 2 percent.

Fox joins Time Warner Inc. in posting results that topped estimates, with both citing rising ad sales and higher subscriber fees. Although several major media companies, including Disney and CBS, have yet to report, the results could ease investors' worst fears about cord-cutting and the decline of pay-TV.

“While media bulls and bears struggle with the impact of cord-cutting and skinny bundles, big media continues to post steady results,” said Paul Sweeney, an analyst at Bloomberg Intelligence. 

Fox's profit, excluding some items, grew to 51 cents a share, the New York-based company said Wednesday in a statement. Analysts were predicting 44 cents, the average of 28 estimates compiled by Bloomberg. Revenue also exceeded projections.

Strong global ad revenue and affiliate fees buoyed Fox's cable TV unit, its biggest business. Results included certain National Geographic businesses acquired in November 2015. Roger Ailes, head of the profitable Fox News Channel, resigned in July amid allegations of sexual harassment, including one case the company settled for a reported $20 million.

Total revenue increased 7.1 percent to $6.51 billion in the period ended Sept. 30, beating projections of $6.49 billion.

• Revenue from cable TV, the company's biggest business, advanced 10 percent to $3.81 billion. Profit rose to $1.38 billion.
• Sales in filmed entertainment expanded 6.8 percent to $1.91 billion, while earnings more than doubled to $311 million, Fox said.
  
• Broadcast TV revenue fell slightly to $1.04 billion. Profit in the division also declined, to $191 million.
• Operating income excluding some items grew 17 percent to $1.79 billion.

Fox's domestic cable business registered 6 percent growth in advertising sales and an 8 percent gain in affiliate revenue, the company said. International revenue expanded similarly and would have been higher if not for changes in foreign currencies. Company executives said on a call that their pay TV operations boosted subscriber rolls in the period.

Profit at the movie-studio unit, 20th Century Fox, climbed from a weak year earlier period, helped by sales of DVDs and downloads from the February hit “Deadpool.” The company also cited the summer movie “Independence Day” even though that picture struggled at the box office.

TV was the one segment that declined from a year earlier, with big events like the Rio Olympics on NBC drawing viewers and advertisers elsewhere. That was partly offset by higher local political advertising at TV stations and gains at the Fox Broadcast Network.

“Today's results from two media giants have to make AT&T more confident in its big content bet,” Sweeney said.

To contact the reporter on this story: Anousha Sakoui in Los Angeles at asakoui@bloomberg.net. To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Rob Golum