Fox Corporation: A Compelling Buy Despite Near-Term Earnings Challenges

In the ever-shifting landscape of media and entertainment, Fox Corporation (FOX) stands out as a compelling case for contrarian value investors. While Wall Street's near-term expectations for the company's Q2 2026 earnings are tempered-forecasting a 52.1% decline in diluted EPS compared to the prior year-Fox's long-term fundamentals, consistent earnings outperformance, and strategic resilience in key revenue drivers like advertising and streaming position it as a strategic long-term investment.

A Track Record of Earnings Resilience

Fox has demonstrated an impressive ability to exceed expectations, even amid macroeconomic headwinds. For fiscal 2025, the company reported total revenues of $16.3 billion, a 17% year-over-year increase, with Adjusted EBITDA rising 26% to $3.62 billion. This momentum carried into Q1 2026, where Fox surpassed analyst estimates by 36.04% in EPS and 4.76% in revenue, reporting $1.51 per share and $3.74 billion in revenue, respectively. Notably, the company has beaten earnings forecasts in all four trailing quarters prior to Q1 2026, underscoring its operational discipline and adaptability.

Advertising and Streaming: The Twin Engines of Growth

Fox's recent performance has been driven by two critical pillars: advertising revenue and its ad-supported streaming platform, Tubi. In Q1 2026, Tubi achieved 27% revenue growth and became profitable for the first time, with average viewing time increasing 18% year-over-year. This success is mirrored in the broader advertising landscape, where Fox News reported record-high first-quarter ad revenue, fueled by heightened engagement and prime-time viewing. Lachlan Murdoch, Fox's CEO, highlighted the strength of the advertising market, particularly in pharmaceuticals, financial services, and AI-related campaigns tied to sports content.

The company's dominance in live sports further solidifies its competitive edge. NFL ratings on Fox rose nearly 12% year-over-year, reinforcing its position as a leader in live event broadcasting. These trends suggest that Fox's advertising revenue streams are not only resilient but expanding, even as broader media sectors face fragmentation.

Stock Performance and Valuation: Outperforming the Market

Fox's stock has consistently outperformed both the S&P 500 and its media sector peers. Over the past 12 months, the stock delivered a 44% return, significantly outpacing the S&P 500's 17% gain. In the past six months alone, Fox's shares rose 31.2% compared to the S&P 500's 11.2%. This outperformance is supported by a robust balance sheet, with $5.35 billion in cash and cash equivalents as of June 30, 2025, enabling continued shareholder returns.

Valuation metrics also present a compelling case. While Fox's trailing P/E ratio of 16.1x exceeds the peer average of 11.2x and the industry average of 14.9x, its PEG ratio of 1.65 indicates that the stock is fairly valued relative to its expected earnings growth. Analysts project a 15.2% rebound in EPS for 2027, suggesting that the current valuation may already discount near-term challenges while underestimating long-term potential.

Addressing Near-Term Challenges

Wall Street's tempered expectations for Q2 2026-forecasting diluted EPS of $0.46, a 52.1% decline from the prior year-reflect cyclical pressures in the media sector. However, Fox's historical ability to exceed estimates (e.g., beating Q1 2026 forecasts by 36.04%) suggests that the company may once again outperform. Management has further signaled confidence through a $1.5 billion share buyback and a $5 billion increase in its repurchase program, bringing the total to $12 billion. These actions underscore a commitment to capital efficiency and shareholder value, even amid short-term volatility.

A Contrarian Case for Long-Term Value

For contrarian value investors, Fox's current valuation and strategic strengths present an opportunity to capitalize on near-term pessimism. The company's strong cash flow, expanding advertising revenue, and leadership in streaming and sports content position it to navigate macroeconomic cycles. Analysts maintain a "Moderate Buy" consensus rating, with a mean price target of $69.92-implying a 5.3% upside from current levels. Given the projected 15.2% EPS rebound in 2027, this target may prove conservative over time.

Conclusion

Fox Corporation's combination of earnings resilience, advertising growth, and strategic innovation in streaming and sports positions it as a compelling long-term investment. While near-term earnings challenges are real, they are outweighed by the company's operational strengths and undervalued fundamentals. For investors willing to look beyond short-term volatility, Fox offers a rare blend of defensive qualities and growth potential-a hallmark of contrarian value investing.