Twenty-First Century Fox Inc. (NASDAQ:FOX)

The financial data reveals multiple trends related to profitability, invested capital, cost of capital, and economic value generation over the six-year period ending June 30, 2018.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibited considerable fluctuations throughout the period. It started at a high level of 7,896 million USD in 2013, dropped significantly to 4,517 million USD in 2014, then surged to 9,417 million USD in 2015. Subsequently, it decreased again to 4,025 million USD in 2016 and showed slight incremental improvements in 2017 and 2018 to 4,273 million USD and 4,669 million USD respectively. This variability indicates inconsistent operational profitability across the years.

Cost of Capital

The cost of capital showed a gradual decline from 14.19% in 2013 to a low of 12.7% in 2016. However, from 2017 onwards, there was a slight upward trend, rising to 14.36% by 2018. This pattern suggests a period of improving capital market conditions or company risk profile up to 2016, followed by a reversal leading to increased capital costs.

Invested Capital

Invested capital demonstrated relative stability with modest variations. It increased from 44,434 million USD in 2013 to a peak of 48,265 million USD in 2014, then declined steadily to 42,462 million USD in 2016. After that, it rose again to 45,055 million USD in 2017 and further to 47,272 million USD in 2018. The fluctuations reflect changes in the company’s asset base and investment strategy over the years.

Economic Profit

Economic profit exhibited a volatile and largely negative trend. It started positively at 1,589 million USD in 2013 but turned negative at -2,214 million USD in 2014. There was a recovery to 3,404 million USD in 2015, indicating value creation during that year. However, the subsequent years showed persistent negative economic profit figures: -1,367 million USD in 2016, -1,522 million USD in 2017, and worsening to -2,119 million USD in 2018. This indicates that, despite some operational profitability, the returns on invested capital frequently failed to exceed the cost of capital, leading to value destruction in several years.

Overall, the data suggest instability in operational performance and mixed efficiency in capital deployment, with several years of negative economic profit overshadowing occasional peaks in NOPAT. The increase in cost of capital towards the end of the period, alongside rising invested capital, potentially compounded challenges in value creation.

Net Income Attributable to Stockholders

The net income showed notable fluctuations over the analyzed periods. It started at 7,097 million USD in 2013, then declined significantly to 4,514 million USD in 2014. In 2015, there was a strong rebound with net income increasing to 8,306 million USD, marking the highest value in the timeframe. Afterward, net income dropped sharply to 2,755 million USD in 2016 and remained relatively low in 2017, with a slight increase to 2,952 million USD. In 2018, net income rose again to 4,464 million USD, indicating partial recovery but still below the earlier peak.

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes demonstrated a pattern similar to net income but with somewhat less pronounced variation. Starting at 7,896 million USD in 2013, it decreased substantially to 4,517 million USD in 2014. NOPAT peaked at 9,417 million USD in 2015, exceeding the initial period's value. Following this peak, it declined sharply to 4,025 million USD in 2016. The next two years showed moderate growth, with NOPAT increasing to 4,273 million USD in 2017 and 4,669 million USD in 2018.

Overall Trend Analysis

Both net income and NOPAT experienced significant volatility throughout the six years. The years 2014 and 2016 are characterized by marked downturns in profitability metrics. The year 2015 stands out as a peak period for both measures, reflecting a temporary strong financial performance. After 2016, there is evidence of gradual operational improvement through 2018, though neither net income nor NOPAT returned to their earlier peak levels by the end of the period. The data suggests a cycle of recovery following considerable profit contractions, warranting further examination of underlying causes during downturn years.

Provision for income taxes from continuing operations

The provision for income taxes generally declined from 2013 to 2016, starting at 1,690 million US dollars in 2013 and decreasing steadily to 1,130 million in 2016. In 2017, there was a notable increase to 1,419 million, followed by a significant drop to a negative figure of -364 million in 2018, which may indicate a tax benefit or a reversal of previous tax provisions.

Cash operating taxes

Cash operating taxes fluctuated over the period. Beginning at 1,612 million US dollars in 2013, the figure increased to 1,707 million in 2014, then decreased to 1,504 million in 2015. A more marked decline occurred in 2016 with taxes dropping to 1,095 million. Subsequently, there was a sharp rise to 1,781 million in 2017 before falling significantly to 904 million in 2018. The fluctuations suggest variability in cash tax payments potentially linked to changing profitability or tax planning strategies.

Total reported debt & leases

The total reported debt and leases displayed fluctuations over the six-year period. Starting at $19,912 million in 2013, the debt increased to a peak of $22,748 million in 2014. Following this peak, there was a general decline in debt, descending to $20,609 million in 2015 and remaining relatively stable through 2016 and 2017, with slight increases and decreases respectively. By 2018, the debt had further decreased to $21,076 million. Overall, the debt levels demonstrate initial growth followed by a slight reduction and stabilization trend.

Total Twenty-First Century Fox, Inc. stockholders’ equity

Stockholders' equity showed an overall increasing trend despite some variability. Beginning at $16,998 million in 2013, there was a moderate increase to $17,418 million in 2014, followed by a small decrease to $17,220 million in 2015. A notable decline occurred in 2016, when equity dropped sharply to $13,661 million. After this decline, equity rebounded, increasing to $15,722 million in 2017 and further to $19,564 million in 2018, marking the highest equity value in the period.

Invested capital

Invested capital demonstrated a fluctuating but generally downward trend in the earlier years, followed by recovery in later years. It began at $44,434 million in 2013, increased to $48,265 million in 2014, then decreased significantly to $44,315 million in 2015 and further declined to $42,462 million in 2016. From 2016 onwards, invested capital increased, reaching $45,055 million in 2017 and $47,272 million in 2018, though it did not quite return to the previous peak observed in 2014.

Economic Profit

The company exhibits considerable volatility in economic profit across the six-year period. Starting with a positive economic profit of $1,589 million in 2013, there is a significant downturn to a loss of $2,214 million in 2014. A notable recovery occurs in 2015, with economic profit reaching a peak of $3,404 million. However, the subsequent years from 2016 to 2018 show continued negative economic profit, with a downward trend and values of -$1,367 million, -$1,522 million, and -$2,119 million respectively. This fluctuation suggests inconsistent value creation over time.

Invested Capital

Invested capital demonstrates moderate fluctuations with a general upward trend over the six-year span. The invested capital increased from $44,434 million in 2013 to $48,272 million in 2018, although this progression includes periodic decreases, such as in 2015 and 2016 when the invested capital declined to $44,315 million and $42,462 million respectively. The overall rise suggests ongoing investment in the company’s assets despite periods of contraction.

Economic Spread Ratio

The economic spread ratio, representing the percentage difference between return on invested capital and cost of capital, mirrors the volatility seen in economic profit. The ratio started positively at 3.58% in 2013, sharply declined to -4.59% in 2014, improved significantly to 7.68% in 2015, and then reverted to negative values from 2016 through 2018 (-3.22%, -3.38%, and -4.48% respectively). These shifts indicate cycles of value creation and value destruction, with the company struggling to sustain returns above its cost of capital in most years.

Adjusted Revenues

The adjusted revenues exhibit fluctuations over the six-year period. Starting at approximately $27,472 million in mid-2013, revenues grew significantly to reach a peak of $31,880 million in mid-2014. This was followed by a decline in the subsequent years, dropping to $28,745 million in mid-2015 and further down to $27,383 million in mid-2016. Revenues showed a slight recovery in mid-2017, reaching $28,575 million, and continued an upward trend toward $30,498 million by mid-2018, although not reaching the earlier peak observed in 2014.

Economic Profit

The economic profit demonstrates considerable volatility and negative trends in multiple years. It began with a positive $1,589 million in mid-2013 but sharply declined to a negative $2,214 million in mid-2014. The figure rebounded notably in mid-2015 to a strong positive $3,404 million, representing the highest economic profit in the period. However, from mid-2016 onward, economic profit again took a downward trajectory with losses recorded each year: negative $1,367 million in 2016, negative $1,522 million in 2017, and further dropping to negative $2,119 million in 2018. This indicates challenges in sustaining profitability despite fluctuations in revenue.

Economic Profit Margin

The economic profit margin, which relates economic profit to revenue, mirrors the fluctuations observed in economic profit. It started positively at 5.78% in mid-2013, declined sharply to -6.94% in mid-2014, and then peaked at 11.84% in mid-2015, signifying efficient profit generation relative to revenues during that year. From mid-2016 forward, the margin remained negative, ranging between -4.99% and -6.95%, reflecting ongoing inefficiencies or increased costs relative to revenue despite some recovery in revenues during 2017 and 2018.

Summary of Financial Performance

Overall, the financial data reflects a pattern of instability in profitability across the examined timeframe. While revenues showed some resilience after an initial increase and subsequent dip, the economic profit and margin reveal significant volatility, with multiple years of negative economic profit and margin after 2015. The peak performance in mid-2015 stands out as an anomaly of strong profitability that was not sustained. Post-2015, the company appears to have faced challenges in controlling costs or generating adequate returns on revenue, resulting in consistent negative economic profitability despite revenue gains. This suggests a need for a strategic focus on improving operational efficiency or revenue quality to enhance profitability going forward.