American Idol Boosts Fox

11/29/2002 12:00 am EST

Focus:

Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

"Fox Entertainment tends to be known for tacky reality shows like Celebrity Boxing," notes Louis Navellier . "Nevertheless, the network has made great strides to improve the quality of its programming, and the network is also the home of critically acclaimed shows like The Simpsons and 24. This balance works for Fox, and advertisers definitely seem to agree." Meanwhile, Fox’s earnings momentum has led the stock to the buy list of the editor's Blue Chip Growth Letter.

"Fox Entertainment (FOX NYSE) is a buy for aggressive investors at prices below $28. Fox, a division of Rupert Murdoch's News Corp. (which owns 85%), currently operates in four major business segments: filmed entertainment, TV stations, broadcast network, and cable network programming. This business diversification means Fox is involved in a wide variety of media outlets, including films, home video releases, DVD sales, network television, news programming, cable programming, and much more.

"The company's television station and cable network programming divisions are especially strong right now and posted good growth over the past quarter. Overall advertising revenue was up nearly 150% at Fox TV. Strong ratings at Fox's cable stations (including Fox News Channel and FX) helped nearly triple the cable programming division's cash flows. Even Fox's television broadcast division showed strong improvement last quarter. The Fox network was helped by the runaway success of the hit American Idol television show. American Idol II will premiere in January and run through the all-important February 'sweeps' period when advertisers closely track the TV ratings.

"The Fox broadcast network should continue to improve financially, as it remains extremely popular with the coveted 18-34 demographic. The network has made great strides to improve the quality of its programming, while still producing the runaway hits its younger viewers love. The diversity of Fox's business will continue to help earnings through fiscal 2003. The filmed entertainment division is expecting strong results from its upcoming theatrical releases and DVD sales. In particular, Fox has high hopes for the release of X-Men II and the DVD releases of Minority Report and Ice Age.

"Overall, Fox's cash flow increased 72% to $467 million for the September quarter, up from $271 million. Many investors have been wary of media stocks because of all the doom and gloom surrounding advertising revenue. But Fox has managed to beat the odds with popular programming and an efficient organization. Analysts are now predicting an improved picture for advertising sales, so Fox should see even more earnings growth in future quarters. The company is expected to earn about 88 cents a share for this fiscal year and $1.18 in 2004. I think this is a great time to buy this stock."

Related Articles on