When media giants Time Warner and Twenty-First Century Fox report earnings Wednesday, investors will listen for what their results might mean mean for a potential merger between the two. The quarterly reports—and their earnings calls—are a crucial opportunity for both companies to make their case to investors: Fox for buying Time Warner, Time Warner for staying independent.
For Fox, which reports after the bell, the question is how it’ll grow its stock’s value. The stock is the currency for its proposed acquisition, comprising 60 percent of the offer. Other key factors investors will be watching include the company’s buyback plan, its debt, the health of its advertising business—particularly in light of lower ratings at its eponymous network—and succession plans after the eventual retirement of Rupert Murdoch.
“There seems to be a logic to the transaction,” said BTIG analyst Rich Greenfield. “What are the key things that the companies can do together that neither can do on its own? In a rapidly changing landscape where you’re looking at consumers spending more time on digital and the rise of more over-the-top brands like Netflix, it does seem like this creates an opportunity to create a pretty compelling online video platform.” Greenfield said he wants to hear from Murdoch on how and where he sees those opportunities.
And from Time Warner CEO Jeff Bewkes, Greenfield said he wants to hear “what are we missing,” i.e., why the two companies shouldn’t combine. (Bewkes previously asserted that the company is more valuable on its own, rather than under Murdoch’s control.) The earnings call will provide for him a key opportunity to lay out his vision for the company, and how he will rev up value.