Theme Parks and Blockbusters: The Media Sector's Earnings Season
Media companies had a dollar problem this earnings season
The rising dollar had an adverse impact on the earnings of media companies in this earnings season. For 21st Century Fox (FOXA), adverse foreign exchange rate fluctuations affected the company’s revenues by 3%.
21st Century Fox also announced at its 2Q16 earnings call that it expects its EBITDA (earnings before interest, taxes, depreciation, and amortization) for fiscal 2016 to be negatively impacted by about $350 million due to exchange rate fluctuations. Over the past six months of fiscal 2016, the company’s EBITDA was adversely impacted by the strengthening US dollar (UUP) to the tune of $220 million. This adverse effect has already exceeded the company’s guidance for fiscal 2016.
In August 2015, the company stated that it expected a negative impact of $200 million on its EBITDA growth rate in fiscal 2016 due to currency fluctuations.
Other media companies affected by the rising dollar
Another company whose earnings were negatively impacted by the rising dollar was News Corp. (NWSA). News Corp.’s revenues were negatively impacted by $141 million from foreign currency exchange rate fluctuations.
Discovery Communications’ (DISCA) international networks made up around 50% of the company’s total revenues in 4Q15 and 2015. So, adverse currency fluctuations negatively impacted Discovery’s revenues in 4Q15 and 2015 by 8% and 2%, respectively.
21st Century Fox makes up 0.68% of the PowerShares QQQ ETF (QQQ). For investors interested in getting exposure to the television and radio sector, QQQ holds 4.9% in TV and radio. QQQ also holds 8.7% of Microsoft (MSFT).
Now let’s take a look at what fueled the growth of advertising revenues in the media sector in the next part of this series.
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