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Broadcasting giant, Fox Corporation (FOX) announced an additional buyback of $3 billion taking its total authorization up to $7 billion. The company will immediately deploy $1 billion of this expanded authorization towards an accelerated share repurchase transaction, while concurrently continuing with its normal buyback program with a repurchase of $450 million across the remainder of the fiscal year. This additional repurchase authorization represents around 16.4% of its market cap at announcement. In June 2021, the company announced an additional share repurchase of $2 billion as well, which represented around 9% of its market cap at announcement. At its current price of $33.13, the company has a market cap of $18.48 billion and an enterprise value of almost $23 billion.
As we are in the peak of earnings season, buyback activity continued in full swing with a total of 23 companies announcing buybacks last week compared to 17 companies in the prior week.
Fox Corporation is an American mass media company formed in 2019 as a result of the acquisition of 21st Century Fox by the Walt Disney Company (DIS) in a $71 billion deal; the non-acquired assets were spun off from 21st Century Fox as Fox Corporation which began trading on March 19, 2019. The company is controlled by the Murdoch family which owns around 40% of the company.
On May 2018 it was confirmed that British-Australian businessman and Rupert Murdoch’s oldest son Lachlan Murdoch, would take charge of new Fox. The company mainly deals in television broadcast, news, and sports broadcasting industries, focusing on producing, licensing, acquiring, marketing, and distributing content. The company is the owner of a lot of brands and programming such as Simpsons, Family Guy, Bob’s Burgers, Hell’s Kitchen, MasterChef, and Next Level Chef. The business has three different segments: Cable Network Programming, Television and Corporate & Eliminations.
Proposed Merger Turned Over:
On October 14, 2022, a special committee was appointed, under the instruction of Rupert Murdoch, to explore a potential merger of Fox and News Corp, bringing the two companies back together after the former 21st Century Fox was spun off from News Corp in 2013. On January 24, 2023, the proposed merger was abandoned as a handful of major shareholders expressed their concerns about the deal.
Share Buybacks:
Fox has been consistently buying back its stock. In 2022, it has reduced its shares outstanding count by 28 million shares. Fiscal year-to-date, the company has repurchased $550 million through its share buyback program. This takes the total cumulative amount repurchased to $3.15 billion, representing 15% of its total shares outstanding since the launch of the program in 2019.
On August 15, 2022, Lachlan Murdoch, CEO of the company, purchased 126,773 Fox’s shares for a total value of $4.6 million.
The stock is cheap with an EV/EBITDA of around 7. This is probably motivating the company to continue buying back stock.
The company also pays its shareholders a small dividend of $0.25 per share paid semiannually. The dividend yield works out to 1.5%. The company is clearly prioritizing share buybacks over dividends to return capital to shareholders, which makes sense given the large insider ownership by the Murdoch family.
Key Metrics:
Revenue has increased for several years, climbing from $9.92 billion in 2017 to $14.29 billion in 2022. Gross margin of 36% and net income margin of 10.5% are respectable if not as exciting or outrageous as some of the company’s content.
M&A:
Lachlan Murdoch, the CEO of Fox has taken a positive approach to M&A at Fox, with several acquisitions valued at more than $7 billion in total since the formation of the company in 2019. In September 2021, Fox Corporation acquired TMZ from WarnerMedia in a $50 million deal with TMZ being operated under the Fox Entertainment division.
In December 2021, Fox Corporation acquired the film and television production studio, MarVista Entertainment in an over $100 million deal. MarVista brings in global distribution capability which was the missing at Fox.
Strong Balance Sheet:
The company’s balance sheet looks quite solid with cash & short-term investments of over $4 billion. Net debt of $4.16 billion (including $900 million in capital leases) is well covered by the company’s free cash flow of $1.94 billion during the trailing twelve months.
Q2 F2023 Results:
Since the spin-off in 2019, Fox has delivered $2 billion in affiliate revenue growth and over $1.3 billion in advertising revenue growth. In Q2 F2023 ended December 2022, the company delivered a 4% increase in its top line, including 4% advertising revenue growth. Its EBITDA grew an impressive 71%, principally due to strong advertising results from sports and the election cycle. Fox’s domination in the fall was led by four of its most prominent packages – the NFL, the Big Ten Network, Major League Baseball and FIFA. Quarterly adjusted EBITDA was $531 million, up $220 million over the prior year. Growth was strong with adjusted EPS of $0.48 per share, up $0.35 when compared to last year’s $0.13 per share. At television, Fox delivered 6% revenue growth, including a 5% increase in advertising revenues.
The Bottom Line:
Fox News is a strong cable news network and occasionally draws more viewers than MSNBC and CNN combined. It uses outrage as a business model by consistently presenting controversial stories and opinions, often with a conservative or right-leaning bias. This strategy can increase viewer engagement and generate higher ratings, which in turn can attract advertisers and increase revenue. Media outlets on the other end of the political spectrum also picked up on this playbook and have benefited from it. However, this approach can also create a polarizing effect, reinforcing existing beliefs and biases among viewers, which in turn deepens the ideological divide within a country.
The broadcasting segment requires a high amount of planning and cost control to avoid overspending and keep quality high. One of the key challenges the company faces is slow revenue growth going forward now that the election cycle and sporting events like the soccer World Cup are over. Fox has underperformed the market over the past year and is down by 15%.
Welcome to edition 46 of Buyback Wednesdays, a weekly series that tracks the top stock buyback announcements during the prior week. The companies in the list below are the ones that announced the most significant buybacks as a percentage of their market caps. They are not the largest buybacks in absolute dollar terms. A word of caution. Some of these companies could be low-volume small-cap or micro-cap stocks with a market cap below $2 billion.
1. Boxlight Corporation (BOXL): $0.56
On February 14, 2023, the Board of Directors of this interactive technology solutions provider, authorized a new $15 million share repurchase program, equal to 39% of its market cap at announcement.
| Market Cap: $41.36M | Avg. Daily Volume (30 days): 631,916 | Revenue (TTM): $222.96M |
| Net Income Margin (TTM): -3.98% | ROE (TTM): -11.17% | Net Debt: $35.69M |
| P/E: N/A | Forward P/E: 8.98 | EV/EBITDA (TTM): 9.30 |
2. Fox Corporation (FOX): $33.13
On February 8, 2023, the Board of Directors of this news, sports, and entertainment company, approved a $3 billion additional share repurchase program equal to 16.4% of its market cap at announcement.
| Market Cap: $18.49B | Avg. Daily Volume (30 days): 1,068,538 | Revenue (TTM): $14.28B |
| Net Income Margin (TTM): 10.55% | ROE (TTM): 13.13% | Net Debt: $4.16B |
| P/E: 12.21 | Forward P/E: 9.75 | EV/EBITDA (TTM): 7.19 |
3. PhenixFIN Corporation (PFX): $36.3
On February 8, 2023, the Board of Directors of this business development company, authorized an additional share repurchase program of up to $10 million of its common stock, equal to 14.3% of its market cap at announcement.
| Market Cap: $76.11M | Avg. Daily Volume (30 days): 1,389 | Revenue (TTM): $17.11M |
| Net Income Margin (TTM): -40.66% | ROE (TTM): -5.09% | Net Debt: $60.95M |
| P/E: N/A | Forward P/E: 15.2 | EV/EBITDA (TTM): N/A |
4. MGM Resorts International (MGM): $44.14
On February 8, 2023, the Board of Directors of this global entertainment company authorized a new repurchase of $2 billion of the company’s Class A common stock, equal to 12.6% of its market cap at announcement.
| Market Cap: $16.73B | Avg. Daily Volume (30 days): 3,877,811 | Revenue (TTM): $13.08B |
| Net Income Margin (TTM): 11.26% | ROE (TTM): 2.51% | Net Debt: $27.96B |
| P/E: 12.56 | Forward P/E: 61.35 | EV/EBITDA (TTM): 43.82 |
5. Check Point Software Technologies Ltd. (CHKP): $125.97
On February 13, 2023, the Board of Directors of this developer of services for IT security authorized an additional $2 billion stock buyback program, representing around 12.5% of its market cap at announcement.
| Market Cap: $15.22B | Avg. Daily Volume (30 days): 834,214 | Revenue (TTM): $2.33B |
| Net Income Margin (TTM): 34.20% | ROE (TTM): 25.76% | Net Cash: $3.50B |
| P/E: 20.33 | Forward P/E: 15.92 | EV/EBITDA (TTM): 12.75 |
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