21st Century Fox Is Valued At A Lower Multiple Than Just About Every Media Company

Twenty-First Century Fox Inc FOXA reported mixed results for 3Q. Bernstein’s Todd Juenger maintained an Outperform rating for the company, with a price target of $35.

21st Century Fox reported its FQ3 operating income ahead of expectations, driven mostly by Film and a little by Cable Networks, while TV missed. This enabled the company to beat net adjusted OIBDA expectations and meet EPS. Domestic affiliate fees grew 7 percent, which “might be viewed as a little light, although we're talking fractions of a percent,” analyst Todd Juenger said.

What The Near Future Holds In Store

21st Century Fox’s OIBDA is now up 4 percent y/y FY-to-date. If the company is able to meet the Bernstein forecast for FQ4, total FY16 OIBDA would be up 5 percent y/y, above the guidance of flat to low single digit growth, Juenger mentioned. He pointed out that the company had not exceeded guidance for a long time.

The analyst believes there would be a significant inflection of growth in FY17. The consensus expectation for two-year EBITDA CAGR is at 9 percent.

The analyst highlighted the fact that 21st Century Fox’s valuation was lower than that of Walt Disney Co DIS, Time Warner Inc TWX, Discovery Communications Inc. DISCA, CBS Corporation CBS and Scripps Networks Interactive, Inc. SNI – “essentially all the core U.S. Media stocks” with the exception of Viacom, Inc. VIAB and AMC Networks Inc AMCX.

“While Fox carries gross leverage of 3x, net leverage is about a turn lower (maybe all that excess cash isn't such a bad thing after all). Finally, Fox has unique assets like Star India which are in a unique operating environment and state of development,” Juenger added.