Media companies have been capitalizing on pandemic-driven tailwinds over the past year. Many companies increased their product offerings to appeal to the masses, as people were locked down at home. The recent, rapid spread of the COVID-19 Delta variant should allow entertainment and media businesses to benefit from strong demand for their products and services as people again limit their outdoor activities.
Furthermore, in February, the U.S. Congress announced its plans to re-introduce the Journalism Competition and Preservation Act. Following Australia's example, the bill requires tech giants, such as Alphabet, Inc. (GOOGL) and Facebook, Inc. (FB), to pay media companies for broadcasting their news. If passed into law, the bill should boost media companies’ profit margins significantly. The global media market is expected to grow at a 10.4% CAGR to $6709.40 billion by 2030.
Thus, we think media giants Fox Corporation (FOXA), News Corporation (NWSA), and AMC Networks Inc. (AMCX) could be solid additions to one’s investment portfolio now.
Fox Corporation (FOXA)
FOXA is a media giant that reports news, sports commentaries, and original content through three segments: Cable Network Programming; Television; and Other, Corporate, and Eliminations. The New York City-based FOX network is one of the largest national television broadcast networks in the United States. According to Nelson Media Channel, FOX News Channel was the most-watched network in all basic cable in July.
On August 25, FOXA invested in blockchain-based content management platform Eluvio to accelerate Eluvio’s adoption across the broader media and entertainment industry. The company believes that an overall shift to the decentralized web will revolutionize entertainment technology.
On August 6, media evaluation company Comscore extended its partnership with FOXA. By leveraging Comscore’s measurement capabilities, FOXA aims to boost a multi-currency marketplace.
In its fiscal fourth quarter, ended June 30, the company’s total revenues increased 19.5% year-over-year to $2.89 billion. This can be attributed to a 37.9% rise in advertising revenues. Its net income rose 87.6% from the prior-year quarter to $272 million, and its EPS improved 115% from the same period last year to $0.43.
FOXA’s revenue is expected to increase 4.9% year-over-year to $12.91 billion in its fiscal year 2021. The Street expects the company’s EPS to be $2.79 in the current year, up 12.5% from the same period last year. FOXA has an impressive earnings history; it surpassed consensus EPS estimates in each of the trailing four quarters. The stock has gained 37.7% in price over the past year and 27.2% year-to-date to close yesterday’s trading session at $37.04.
FOXA has a B grade for Value and Momentum in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighed to an optimal degree.
In the 17-stock Entertainment – Media Producers industry, FOXA is ranked #4.
Click here to see the additional POWR Ratings for FOXA (Growth, Stability, Sentiment & Quality).
News Corporation (NWSA)
NWSA is a diversified media and information services company that creates and distributes content worldwide. The New York City-based company operates through six segments: Digital Real Estate Services; Subscription Video Services; Dow Jones; Book Publishing; News Media; and Other. Its popular journals are The Wall Street Journal, Factiva, Dow Jones Risk & Compliance, Dow Jones Newswires, Barron’s, MarketWatch, and Investor’s Business Daily.
On August 5, NWSA confirmed that it had agreed to acquire oil and gas pricing analytics company, Oil Price Information Service (OPIS), from S&P Global and IHS Markit for $1.15 billion. OPIS will become part of Dow Jones’ rapidly growing Professional Information Business (PIB). Robert Thomson, Chief Executive of News Corporation, said, “OPIS will be the cornerstone for a rising commodities, energy, and renewables digital business that we are convinced will have a positive impact on Dow Jones and News Corp.”
NWSA’s revenue increased 30% year-over-year to $2.49 billion in its fiscal fourth quarter, ended June 30. Its total segment EBITDA rose 8% from the same period last year to $210 million. Its cash and cash equivalents stood at $2.24 billion as of June 30, indicating a 47.4% increase from the same period last year.
Analysts expect NWSA’s EPS to increase 87.5% year-over-year to $0.15 in the next quarter (ending September 2021). The Street’s $2.35 billion revenue estimate for NWSA’s fiscal first quarter reflects a 19% improvement year-over-year. NWSA has topped consensus EPS estimates in three of the trailing quarters. Over the past year, NWSA has gained 50.6% in price to close yesterday’s trading session at $22.58.
NWSA has an overall B rating, which equates to Buy in our POWR Ratings system. In addition, it has a B grade for Growth, Momentum, Stability, and Sentiment. The stock is ranked #1 in the Entertainment – Media Producers industry.
Click here to see NWSA’s POWR Ratings for Value and Quality.
AMC Networks Inc. (AMCX)
The New York-based entertainment company sells various video entertainment products, network channels, film distribution, subscription streaming businesses, etc., worldwide. Its operations take place in two segments—National Networks and International and Other.
Verizon Communications Inc. (VZ) has added AMC+, AMCX’s premium streaming service, to its streaming media platforms. This partnership gives Verizon users access to the AMCX subscription platform. “Over the last year, we have seen tremendous interest in AMC+ from consumers and our distribution partners, and the launch of this new partnership with Verizon couldn’t be better timed, with the premiere of the 11th and final season of The Walking Dead later this month and a truly spectacular lineup of original programming coming later this year and in 2022,” said Josh Reader, president of distribution and development for AMC Networks.
AMCX’s net sales for its fiscal second quarter, ended June 30, increased 19.4% year-over-year to $771.39 million. In addition, the company’s operating income improved 39.9% from the prior-year quarter to $68.26 million, while its EPS improved 196.4% year-over-year to $0.83.
A $8.59 consensus EPS estimate for the current year indicates a 10.7% increase from the same period last year. Likewise, the $2.97 billion consensus revenue estimate for the current year reflects a 5.6% increase year-over-year. In addition, AMCX has a spectacular earnings surprise history; it topped consensus EPS estimates in each of the four trailing quarters. AMCX has gained 87.1% in price over the past year to close yesterday’s trading session at $47.16.
AMCX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. In addition, it has a Quality grade of A, and a Value and Momentum grade of B, and is ranked #2 in the Entertainment – Media Producers industry.
In addition to the POWR Ratings grades I’ve highlighted, one can see AMCX ratings for Growth, Stability, and Sentiment here.
FOXA shares were trading at $36.91 per share on Thursday morning, down $0.13 (-0.35%). Year-to-date, FOXA has gained 27.44%, versus a 20.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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