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21st Century Fox Earnings Down Despite Cable Gains

Gains at 21st Century Fox’s cable networks were offset by declines in its movie, broadcast and DBS businesses during its second fiscal quarter.

Net income fell 50% to $1.2 billion, or 53 cents a share, from $2.4 billion, or $1.01 a share a year ago, as expenses associated with acquisitions and consolidations added red ink. The company said that quarterly income from continuing operation was $982 million, compared with $1.06 billion the year before.

Revenues rose 15% to $8.16 billion, thanks in part to acquisitions.

“In the fiscal second quarter, we continued to deliver top-line revenue growth across our businesses, including double-digit increases in affiliate fees and retransmission consent revenues as well as the inclusion of Sky Deutschland results,” said Rupert Murdoch, chairman and CEO, in a statement. “Our quarterly OIBDA results also reflect the planned investments we are making in our core businesses to support long-term growth. We remain confident that these investments, together with our demonstrated ability to consistently grow our revenues, will drive 21st Century Fox’s future profits and cash flow toward our targets and even better position the company to benefit from the increasing global demand for premium content and channels.”

But the company lowered its guidance for the full year, citing disappointing performances at its film and broadcast units. The company now says it expects mid to high single digit growth in total segment earnings before taxes, depreciation and amortization, down from a high-single  to low double digital growth forecast three months ago.

Speaking on the company’s earnings conference call with analysts, CFO John Nallen said that at Fox Broadcasting primetime ratings will be lower than anticipated, largely do to declines at X Factor and American Idol.

Despite the cut in guidance, Chase Carey, president and COO, said that “structurally and strategically, the company has never been stronger and better positioned” and that he remained confident about achieving long-term goals. He added that he expected lower ratings for Idol, even though it’s a better show this season.

In the second quarter, 21st Century Fox’s cable network programming group’s operating income rose 2% to $1.04 billion. Profit growth was held down by a 22% increase in expenses as the company launched new channels including Fox Sports 1, FXX and Star Sports in India.

Revenues were up 14% to $2.964 billion. Domestic affiliate growth was up 15%, led by gains at the regional sports networks and FX.

Domestic advertising revenue grew 7%, driven by double digit growth at FX Networks and the company’s sports networks. Ad revenues were up at RSN, which aired more hockey games than last year, when there was a lockout. Ad revenues were down at Fox News Channel, which benefited in 2012 from the presidential election.

21st Century Fox’s television segment, which includes Fox Broadcasting, reported a lower operating income of $218 million, down 11%, as investment in new scripted programming offset revenue gains.

Retrans payments boosted revenues by 6% to $1.63 billion. Advertising revenues grew slightly. Fox garnered higher rates for the NFL and Major League Baseball—including two additional World Series games. Entertainment revenues were down—led by declines at X Factor—and Fox’s TV stations had lower political spending.