FOX 3Q Earnings Preview: EBITDA May Take A Hit From Sports Cost Inflation

Fox Corp FOXA is scheduled to report its fiscal third-quarter results on April 14.

According to Goldman Sachs, the EBITDA estimate for the fiscal third quarter has been reduced from $818 million to $753 million, slightly below the consensus of $755 million. Revenue was $4.11 billion, versus the consensus of $4.16 billion.

The Fox Analyst: Analyst Michael Ng maintained a Buy rating and price target of $60.

The Fox Thesis: Ng said in the note that the company could report Cable Network EBITDA of $803 million, beating the consensus of $788 million.

He added, however, that Fox's revenue momentum may be offset by elevated operating expenses "on heightened news gathering costs post-election."

The analyst lowered the estimate for Television EBITDA from $101 million to $36 million, below consensus of $47 million, "reflecting a more negative view on Super Bowl profitability."

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Super Bowl could generate around $650 million in revenue, with the sports rights costing $700 million, leading to losses of approximately $50 million, he stated.

Fox is the "best positioned to navigate through changes in pay TV given its sports & news focused portfolio and TV ratings momentum across FOX broadcast and Fox News," Ng wrote.

FOXA Price Action: Shares of Fox had risen by 2.39% to $54.66 at the time of publication on Tuesday.

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