Twenty-First Century Fox's Q2 Results Have Potential Negative Read Across To Disney

When Twenty-First Century Fox Inc FOXA reported a slight deceleration in domestic affiliate fee growth Tuesday, Sanford C. Bernstein and Company was less concerned about Fox than it was about Walt Disney Co DIS.

Fox’s report gave analyst Todd Juenger reason to expect “no sequential change or a fractional negative change in Disney's domestic affiliate fee growth rate.”

Juenger published in a note that the results would align with the firm’s expectations but would prove disappointing for investors looking for improvement. A deceleration from 8 percent to 7 percent would negate the CEO’s last-quarter comments about the abating impact of skinny-bundle subscriptions.

This “shouldn't really matter much to DIS stock — except that the hopes stoked by the CEO's comments seemed to matter a lot,” Juenger wrote. Share values had reversed from negative-3 percent to positive-3 percent following the executive's remarks.

Despite the latest unwelcome news, the Bernstein firm rated Disney at Market-Perform with a target price of $107 in advance of the company’s Tuesday earnings report.

Back to Fox

For Fox, Juenger reported that the deceleration in fee growth matters little relative to anticipated acceleration in the second half of the year precipitated by a recent Comcast deal.

The company’s adjusted EPS beat consensus by 7 percent, and its quarterly revenue increased 4 percent year-over-year.

Juenger said the in-line earnings for Fox clarified the ambiguity of factors driving the stock in the immediate future — M&As, reflation, tax rates and DMVPD launches.

The Bernstein firm rated Fox at Market Perform with a price target of $28.