Fox Corp (FOXA): UBS expects Fox's F1Q momentum to combine with World Cup-driven advertising and stronger Tubi growth.

Overview

This F1Q preview assesses Fox Corp's near-term earnings momentum and the longer F27 setup. UBS expects World Cup-related advertising, improving Tubi performance, cable distribution gains and later political advertising to support results, while retaining its Buy rating and US$78 target.

Core views

UBS expects F1Q results to benefit from the World Cup knockout stage alongside continued underlying operating momentum. It forecasts total company advertising growth of 35% year on year, up from its prior 32% estimate; excluding the World Cup, Tubi and other items, growth would be 3%. Distribution revenue is projected to rise 4.8%, versus UBS's prior 4.4% forecast and 5.2% in the preceding quarter. The resulting F1Q EBITDA forecast is US$1.37bn, above UBS's prior US$1.35bn and Visible Alpha consensus of US$1.36bn, and nearly 30% above a year earlier. The principal estimate change is a higher Tubi assumption. UBS now expects Tubi revenue growth of 25% year on year, versus 17% previously, after conference commentary indicated the quarter began at a pace comparable with F4Q's 35% growth. In Television, UBS expects advertising to rise 43% in F1Q, or 7% excluding World Cup, political and other items. It sees rising Tubi viewership sustaining its growth while linear advertising declines 1% on the same adjusted basis. Television EBITDA is now forecast at US$657m, versus UBS's earlier US$626m estimate and US$399m a year ago, with World Cup profits and improving Tubi profitability driving the year-on-year increase. For Cable Networks, UBS expects distribution revenue to grow 7.1% in F1Q, slightly ahead of 6.9% in F4Q, supported by FOX One despite likely higher post-tournament churn. It expects cable advertising to grow 10%, compared with its prior 8% estimate and Visible Alpha consensus of 6%, as FOX News audience comparisons improve and CPM inflation persists. FOX News C3 average viewers were down 16% year on year quarter-to-date, an improvement from a 19% decline last quarter. Higher distribution and advertising revenue are expected to support cable EBITDA of US$845m, up 6% year on year but slightly below UBS's prior US$853m forecast; consensus is US$818m. UBS leaves its full-year assumptions largely unchanged. It forecasts F27 EBITDA of US$4.1bn, compared with US$3.9bn in F26, supported by the World Cup knockout stage in F1Q, mid-term elections, moderating digital losses, renewal activity and stronger cable-news advertising. It expects TV affiliate revenue to decline 0.5% before renewals support 3% growth in F27. UBS also expects Fox to benefit over time from skinny sports/news bundles. UBS remains bullish because it views Fox's sports and news focus as well positioned for core improvement and cyclical tailwinds that could exceed near-term Street estimates. It also considers the pending Roku transaction a long-term positive, arguing that it could accelerate company growth and increase exposure to connected TV as viewing shifts from the linear bundle to streaming. The shares trade at about 5.5x 2028 estimated standalone EBITDA, or about 8x on a pro forma Roku basis. UBS's US$78 price target uses 7x standalone forward EBITDA and 10x FCF.

Analysis framework

UBS builds an F1Q earnings forecast by separating advertising, distribution and segment EBITDA, comparing its revised estimates with prior UBS forecasts and Visible Alpha consensus. It then connects operating assumptions for Tubi, World Cup programming, FOX One, news ratings and pricing to full-year EBITDA, before applying forward EBITDA and free-cash-flow valuation multiples to set its target price.

Methodology notes

• Valuation methodsEV/EBITDA valuation

  Forward EBITDA multiple valuation

  UBS values Fox using 7x standalone forward EBITDA and also discusses the stock's standalone and pro forma Roku EBITDA multiples.

• Valuation methodsFCFF/FCFE Free Cash Flow

  Free-cash-flow multiple valuation

  UBS supplements its EBITDA-based target framework with a 10x FCF multiple and forecasts free cash flow excluding items.

• Industry AnalysisVolume-price decomposition

  Advertising growth analysis through audience trends and CPM pricing

  UBS links improving FOX News audience comparisons and persistent CPM inflation to stronger cable advertising growth.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Fox Corp (FOXA.US)

  Primary covered company; UBS expects advertising, distribution and Tubi momentum to support F1Q and F27 earnings.

  Strengths

  Sports and news focus, World Cup and political-advertising tailwinds, Tubi growth, FOX One distribution uplift and improving cable-news advertising.

  Weaknesses

  Linear advertising is expected to decline 1% excluding World Cup, political and other items; TV affiliate revenue is expected to decline 0.5% before renewals.

  Comparison

  F1Q EBITDA forecast of US$1.37bn is above Visible Alpha consensus of US$1.36bn; cable advertising growth forecast of 10% exceeds consensus of 6%.

  Risks

  Pay-TV ecosystem and US television advertising conditions, macroeconomic sensitivity, and direct-to-consumer cannibalization or margin pressure.

Key data

• F1Q total advertising growth35% YoYUBS prior estimate was 32%; 3% excluding World Cup, Tubi and other items.
• F1Q distribution growth4.8%Versus UBS prior 4.4% and 5.2% in the prior quarter.
• F1Q EBITDAUS$1.37bnVersus UBS prior US$1.35bn, Visible Alpha consensus US$1.36bn; nearly 30% YoY growth.
• Tubi growth25% YoYRaised from UBS's prior 17%; F4Q growth was 35%.
• Cable advertising growth10% YoYVersus prior 8% and Visible Alpha consensus 6%.
• F27 EBITDAUS$4.1bnUnchanged UBS forecast versus US$3.9bn in F26.
• Price targetUS$78.00Based on 7x standalone forward EBITDA and 10x FCF.

Impact & implications

UBS expects the combination of underlying improvement and F27 cyclical catalysts to support earnings above near-term Street expectations. It views the Roku transaction as increasing Fox's long-term connected-TV exposure as viewing shifts from linear television to streaming.

Risks

• The health and sustainability of the US pay-TV ecosystem could affect media-network earnings.
• US advertising, especially television advertising, is sensitive to GDP and consumer-spending conditions.
• Changes in US economic or consumer-growth expectations could alter UBS's forecasts, rating and price target.
• The transition to direct-to-consumer models could cannibalize legacy revenue and dilute margins.
• International pay-TV and advertising exposure can add foreign-exchange translation risk.

What to watch

• Tubi revenue growth and profitability relative to UBS's 25% F1Q growth forecast.
• The extent of World Cup knockout-stage advertising and profit contribution in F1Q.
• FOX One's distribution benefit and post-tournament churn.
• FOX News ratings comparisons and cable advertising pricing.
• The timing and earnings impact of mid-term elections, renewals and the pending Roku transaction.