Fox Corp (NASDAQ:FOXA) is expected to report steady results for the fiscal third quarter, though attention is increasingly turning to the looming renewal of its NFL media rights, according to analysts at Bank of America.
The firm wrote that it anticipates fiscal third-quarter performance will “largely reflect a continuation of underlying trends,” supported by Fox’s concentration in live programming such as news and sports, which it views as better positioned than entertainment within the traditional TV bundle.
Bank of America modestly raised its estimates, now forecasting revenue of $3.79 billion and OIBDA of $743 million, up from prior projections, citing stronger cable advertising.
The analysts expect cable revenue to grow about 1%, while television revenue is projected to decline 22% due to comparisons with last year’s Super Bowl.
While Fox has a history of outperforming expectations, the analysts wrote that investor focus is likely to shift toward the upcoming NFL rights negotiations, which they described as having “critical implications for the P&L.”
The firm expects the NFL to begin renegotiating media deals soon amid strong viewership and rising rights costs. It wrote that traditional broadcasters face “a set of unfavorable choices,” including paying more to retain rights, accepting less favorable packages, or potentially losing them altogether.
Although Fox could offset higher costs through advertising and affiliate fee increases, Bank of America cautioned that such measures may take time and may not fully compensate.
The analysts maintained an ‘Underperform’ rating and $45 price objective, implying downside from current levels of about $58.
“We view Fox's sports and news asset mix positively but note the company's higher relative exposure to the linear TV ecosystem versus our coverage universe,” they wrote.
“Additionally, we see Fox as the most exposed stock in our coverage to the upcoming NFL renewal, and we believe the stock will remain challenged until there is certainty with the NFL.”
Fox is expected to report its Q3 earnings on May 11.