‘Bohemian Rhapsody’ Boosts Fox Q2 Earnings Above Wall Street Expectations

Company’s sale of film and TV entertainment assets to Disney still expected to close first half of 2019

Rami Malek Bohemian Rhapsody
(Image credit: 20th Century Fox)

Twenty-First Century Fox reported earnings for the 2019 second quarter early on Wednesday that outperformed Wall Street expectations as “Bohemian Rhapsody” helped rocket the film division forward.

Fox also said it completed the sale of its stake in U.K. broadcaster Sky during the second quarter, which the company said resulted in $15.1 billion in proceeds yielding a pretax gain of $10.8 billion.

Fox reported earnings of 37 cents per share for the second quarter, which was down 12 percent compared with the 42 cents per share the company reported during the same quarter a year ago. Fox’s earnings per share was, however, above analysts’ expectations for 33 cents per share, according to estimates collected by Yahoo Finance.

Revenue for the quarter was $8.50 billion, an improvement compared with the $8.04 billion reported in the year-earlier period, and in line with analysts’s forecast for revenue of $8.50 billion.

Fox said that its filmed entertainment segment generated operating income before depreciation or amortization of $193 million during the quarter, which was up 47 percent compared to the $131 million reported in the prior year quarter, thanks to the worldwide theatrical performance of “Bohemian Rhapsody” ($833.4 million).

The film business also benefitted from lower theatrical releasing costs from a comparatively lower number of films released in the current quarter, and the worldwide home entertainment and pay television performance of “The Greatest Showman.”

“Our Company delivered another strong quarter of financial results, underpinned by distribution and advertising revenue increases at our domestic cable networks and broadcast businesses and the substantial gain on our sale of Sky,” said Fox executive chairmen Rupert and Lachlan Murdoch in a statement. “These results reflect our continued commitment to excellence in all aspects of our business. There has also been significant progress regarding the transaction with Disney and the spin-off of Fox Corporation including the effectiveness of the Form 10.

“Lastly, it is a fitting tribute that our film and television production businesses were recently recognized with industry leading Golden Globe wins and Academy Award nominations,” they continued. “Our achievements, including the value we have delivered for shareholders, are a credit to all our talented colleagues. Thanks to their hard work, we have created durable businesses for the long term, and strong momentum as we near the creation of Fox Corporation and the combination with Disney.”

Fox’s TV division reported an operating loss of $22 million, a decline of $78 million from the amount reported in the prior year quarter. The loss was a result of a 24 percent increase in TV’s expenses, due to higher sports programming costs reflecting the impact of the inaugural broadcast season of “Thursday Night Football,” more than offset a 19 percent revenue growth from increases in advertising, affiliate and content revenues.

Operating income at Fox’s cable networks rose 7 percent in the quarter to $1.45 billion, as revenue increased 4 percent thanks to higher affiliate revenues, but was partially offset by a 2 percent increase in expenses tied to higher sports rights costs at both the regional sports networks and FS1 and higher entertainment programming costs at FX Networks.

Disney is awaiting final regulatory approval to close its $71.3 billion acquisition of Fox’s film and TV entertainment assets, Disney CEO Bob Iger said during the company’s quarterly conference call on Tuesday. That deal is expected to close in the first half of 2019 and would leave Fox with a portfolio of news, sports and broadcast businesses, including the Fox News Channel, Fox Business Network, Fox Broadcasting Company, Fox Sports, Fox Television Stations Group, and sports cable networks FS1, FS2, Fox Deportes and Big Ten Network, and certain other assets.

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