Fox Corporation (FOX) Stock Analysis

Fox Corporation (FOX) Stock Analysis

Industry: Broadcasting & Cable TV

Analysis Date: February 17, 2025

1. Company Overview

Fox Corporation (NASDAQ: FOX) is a prominent media company delivering news, sports, and entertainment content primarily in the United States. With a portfolio that includes the FOX Network, FOX News, FOX Sports, and various cable and digital properties, the company focuses on live events and news programming to drive viewership and advertising revenue.

Key Business Segments:

·       Cable Network Programming:

    • Fox News Channel, Fox Business, FS1, FS2: Generates advertising and affiliate fee revenues from cable and satellite providers.

·       Television (Broadcast):

    • FOX Network & TV Stations: Offers prime-time entertainment, sports, and local affiliate broadcasts.

·       Other Assets & Digital:

    • Tubi (Ad-Supported Streaming): Expands Fox’s digital reach via free, ad-supported streaming.
    • Sports & Event Rights: Includes NFL, MLB, and other sports broadcasting rights that drive large live audiences.

Strategic Initiatives:

  • Focus on Live Content & News: Emphasizing news, sports, and event-based programming to retain viewers and command premium advertising rates.
  • Digital Expansion: Leveraging Tubi and digital properties to reach cord-cutters and tap into growing streaming ad markets.
  • Cost Management & Shareholder Returns: Continuing disciplined spending and share repurchases, while paying a growing dividend.

2. Financial Performance

a. Revenue & Growth

  • TTM Revenue: $15.18 Billion
  • YoY Revenue Growth (TTM): +4.29%

Analysis:
Fox’s revenue growth is modest, driven by advertising and affiliate fee gains, partially offset by cord-cutting pressures and competitive dynamics in the streaming market. A 4.29% revenue increase underscores resilience in live news and sports programming demand.

b. Profitability

  • Net Income (TTM): $2.19 Billion
  • EPS (TTM): $4.67
  • Profit Margin: 14.39%
  • Return on Equity (ROE): 20.05%

Analysis:
Fox maintains healthy profitability, with a net margin of over 14% and ROE above 20%. While the company faces ongoing shifts in consumer behavior, its focus on live content and news helps sustain robust bottom-line results.

c. Margins

  • Gross Margin: 36.58%
  • Operating Margin: 19.64%
  • EBITDA Margin: 22.27%

Analysis:
A nearly 20% operating margin illustrates efficient cost management, particularly in acquiring and producing live sports and news content. EBITDA margin above 22% reflects the strength of affiliate and advertising revenue streams.

d. Cash Flow

  • Operating Cash Flow (TTM): $2.17 Billion
  • Capital Expenditures (TTM): -$333 Million
  • Free Cash Flow (TTM): $1.84 Billion
  • FCF Margin: 12.11%

Analysis:
Fox generates substantial free cash flow, supported by steady affiliate fees and advertising sales. A FCF margin above 12% provides ample capacity for dividends, share buybacks, and strategic investments.

3. Balance Sheet & Liquidity

  • Cash & Equivalents: $3.32 Billion
  • Total Debt: $8.12 Billion
  • Net Cash Position: -$4.80 Billion (approximately -$20.38 per share)
  • Current Ratio: 2.50
  • Debt-to-Equity Ratio: 0.69

Analysis:
Though Fox has a net debt position of $4.80 billion, a current ratio of 2.50 indicates solid short-term liquidity. The debt-to-equity ratio under 1.0 is moderate, reflecting a manageable leverage structure.

4. Valuation

  • PE Ratio (TTM): 11.19
  • Forward PE: 13.62
  • P/FCF Ratio: 13.31
  • EV/EBITDA: 8.75

Analysis:
Fox’s valuation multiples—particularly a PE near 11—suggest the stock trades at a modest multiple relative to earnings. A P/FCF of roughly 13 also appears attractive, reflecting market caution regarding shifting media consumption trends but offering potential upside if the company continues to deliver steady free cash flow.

5. Market Performance

  • 52-Week Range: $25.82 – $52.54
  • 52-Week Price Change: +91.48%
  • Beta (5Y): 0.77
  • Average Volume (20 Days): ~1.15 Million shares
  • Short Interest: 3.05 Million shares (1.29% of outstanding)

Analysis:
Fox’s share price has nearly doubled over the past year, likely reflecting investor recognition of stable profitability and a rebound in advertising spend. A beta under 1.0 indicates lower volatility relative to the market. Short interest is low, suggesting limited bearish sentiment.

6. Dividend & Shareholder Returns

  • Annual Dividend Per Share: $0.54 (TTM)
  • Dividend Yield: 1.03%
  • Dividend Growth: ~3.85% YoY
  • Payout Ratio: 11.56%
  • Buyback Yield: 6.78%
  • Shareholder Yield: 7.81%

Analysis:
Fox offers a modest but growing dividend, with a low payout ratio under 12%. Notably, the company has reduced its share count by nearly 7% in the past year through buybacks, driving a high buyback yield of around 6.8%. Combined, these returns reflect management’s commitment to capital returns.

7. Conclusion

Pros:

  • Stable Cash Flow & Profitability: Fox’s free cash flow margin above 12% and profit margin over 14% indicate reliable earnings power.
  • Attractive Valuation: With a PE ratio near 11 and a P/FCF around 13, the stock appears undervalued compared to many peers.
  • Strong Balance Sheet: A current ratio of 2.50 underscores comfortable liquidity, while moderate leverage (debt-to-equity of 0.69) supports future growth or acquisitions.
  • Consistent Capital Returns: Dividends and share buybacks enhance shareholder returns, backed by robust free cash flow.

Cons:

  • Shifting Media Landscape: The move toward streaming and digital platforms poses long-term challenges for traditional cable and broadcast models.
  • Reliance on Live Content: While sports and news are resilient, expensive sports rights and competition for live events could pressure margins.
  • Advertising Cyclicality: Economic downturns or industry-specific headwinds can reduce ad spend, affecting Fox’s revenue stability.

Final Note:
Fox Corporation stands out with its strong free cash flow, modest valuation, and focus on live news and sports content, which remain highly valuable in a fragmented media environment. While the evolving landscape of streaming and digital platforms presents long-term challenges, Fox’s disciplined cost management, shareholder-friendly policies, and strategic emphasis on must-watch content position it for continued stable performance.

Disclaimer:
This analysis is for informational purposes only and does not constitute investment advice. Investing involves risks, including potential loss of principal. Past performance is not indicative of future results. Please consult a qualified financial advisor before making any investment decisions.

 

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