Proactive Investors - Fox Corp (NASDAQ:FOXA) is well positioned to accelerate its earnings in fiscal 2025, say analysts at Bank of America (NYSE:BAC) who have reiterated their ‘Buy’ rating on the stock.
Ahead of the media and entertainment company’s fourth quarter fiscal 2024 earnings report, the analysts wrote in a note to clients that they see Fox benefitting from an improving advertising backdrop and a healthy balance sheet.
“In our view, fiscal 2024 was set to be a challenging year given the extremely difficult comparisons to fiscal 2023, which included the Super Bowl, the World Baseball Classic, a midterm political cycle and Men's World Cup,” they wrote.
“Fox is now set up to accelerate earnings in fiscal 2025 due to an improving advertising backdrop which should benefit from the Presidential election cycle in the second half of calendar year 2024, continued momentum at Tubi, the Super Bowl in 2025 and strength in Live News and Sports including major soccer events.”
They believe Fox’s Q4 earnings will largely reflect a continuation of recent trends.
They continue to expect quarterly revenue of $3.1 billion, operating income before depreciation and amortization (OIBDA) of $690 million, and free cash flow of $960 million but raised their earnings per share estimate to $0.80 from $0.79.
In advertising, they see Sports and Tubi as areas of strength while the linear general entertainment advertising market is more mixed.
They noted that ratings have improved for News, benefiting from recent high-profile events and a lapping of a key anchor change in April 2023, referring to far-right host Tucker Carlson’s exit from the company.
They forecast Cable revenue growth of 1% and Television up 3% to reflect recent advertising trends, continued strong retransmission growth and a tough comparison at Tubi.
The analysts have a $40 price objective on Fox, representing upside to its share price at the time of writing of about $34.
“Fox appears attractive trading at less than 6 times our calendar year 2025 enterprise value (EV)/earnings before interest, taxes, depreciation and amortization (EBITDA), below other media and entertainment peers (e.g. Disney at about 11x, Paramount at about 6x), and we believe valuation should provide downside protection to shares,” the bank’s analysts wrote.
“Fox also has the least exposure to entertainment advertising given their asset mix, which is biased towards sports and news.”