21st Century Fox CEO Rupert Murdoch

Rupert Murdoch, chairman and chief executive of 21st Century Fox, is shown. The company reported lower-than-expected earnings for its first financial period since the separation of its publishing assets. (Bloomberg / October 31, 2013)

Rupert Murdoch's newly streamlined 21st Century Fox media company missed Wall Street's profit expectations for the fiscal first quarter, despite raking in higher revenue from television programming fees and advertising sales.

The quarter ended Sept. 30 marked the first reporting period for the slimmed down and newly minted company, which spun off its publishing assets at the end of its last fiscal year in June, and changed its name to 21st Century Fox.

For the quarter, Fox reported net income of $1.26 billion, or 54 cents a share, compared to $2.23 billion, or 94 cents a share, a year earlier.  On an adjusted earnings-per-share basis, to exclude the sale of an ownership interest in a pay TV encription business, the film and television company earned 33 cents a share, down from 38 cents a share a year earlier.

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That missed analysts' estimates of 34 cents a share.

Fox generated $7.06 billion in revenue for quarter. In the year-earlier period, the company -- then called News Corp. -- generated revenue of $8.14 billion. 

However, on an adjusted basis, the television and film assets took in 18% higher revenue. In the year-earlier period, revenue was $6 billion. The $1-billion boost came from higher cable affiliate fees and higher ad revenue as well as the consolidation of several new businesses.

"We are on-plan building a foundation for sustainable long-term growth," Fox Chief Operating Officer Chase Carey told analysts Tuesday in a conference call. "We feel good about the momentum of our business although we have a few soft spots to address."

Financial analysts polled by FactSet had expected Fox to produce earnings of 34 cents per share on revenue of $6.8 billion during the July-September quarter.

Cable television continues to be the heart of the company, producing about three-quarters of the company's profits. Cable TV produced $2.8 billion in revenue, compared to $2.5 billion in the year-earlier period.

The cable TV segment's reported operating income before depreciation and amortization of $991 million was lower than the $1-billion-plus in the year-earlier period. Profits were dinged by startup costs for two new national networks, Fox Sports 1 and FXX, as well as an unfavorable exchange rate.

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Cable affiliate revenue was up 10% domestically, and 40% internationally.  Advertising revenue at Fox's U.S. networks was up 6%, driven by double-digit ad growth at FX Networks, National Geographic channels and the regional sports networks. 

Fox News Channel ad revenue was down because the year-earlier period was awash in the political dollars that accompanied the presidential election.

Broadcast television had a solid quarter. The segment generated more than $1 billion in revenue, compared to $972 million in the year-earlier period.  Operating income was $231 million, an increase of 30%, compared to $178 million in the previous-year period. 

The increase was fueled by a doubling of retransmission consent fees.

Film studio 20th Century Fox had tough comparisons because the year-earlier period enjoyed huge profits from the worldwide hit "Ice Age: Continental Drift." Films in theaters during the quarter were "The Wolverine" and "The Heat." The filmed entertainment unit generated $2.12 billion in revenue, up from $1.9 billion in the year-earlier period. 

Studio operating income hit $328 million, down from $433 million in the year-earlier period.

"Our film studio has been a bit more up and down to start the year," Carey said, adding the studio is hopeful for its winter releases, including "The Secret Life of Walter Mitty," with Ben Stiller.

The television studio helped the film segment's performance with syndication sales of "Modern Family" and the sale of two seasons of "New Girl" episodes to online streaming service Netflix.


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