Amidst rumors of business divestment, hullabaloo on the
leadership of Rupert Murdoch, and the phone hacking scandal that
resulted in the closure of 'The News of the World',
) posted better than-expected third-quarter 2012 financial results,
beating the Zacks' expectations on both lines.
However, the company came in full support for Rupert Murdoch,
rebutted the speculation that it will offload its publishing
business, which includes the issues of The Australian and the Wall
Street Journal, and added that they are presently comfortable with
their current stake of 39% in British Sky Broadcasting Group.
Coming to the quarter's earnings, healthy performances across
cable networks and film studio business were the catalysts. News
Corporation's quarterly earnings of 37 cents a share beat the Zacks
Consensus Estimate of 31 cents, and increased 42% from 26 cents
earned in the year-ago quarter.
On a reported basis, including one-time items, News
Corporation's quarterly earnings came in at 38 cents, up from 24
cents delivered in the year-ago quarter.
News Corporation, a diversified media conglomerate, hinted that
total revenue nudged up 2% year over year to $8,402 million,
reflecting growth across Cable Network Programming (up 16% to
$2,375 million) and Filmed Entertainment (up 11% to $1,722
million), partially offset by Television (down 16% to $1,208
million) and Publishing (down 3% to $2,025 million). Direct
Broadcast Satellite Television revenue remained flat at $923
million. The Other segment's revenue plunged 31% to $149 million.
Total revenue also surpassed the Zacks Consensus Estimate of $8,230
Total adjusted segment operating income grew 16% to $1,375
million during the quarter. However, when including phone hacking
probing charges of $63 million for the reported quarter and a
litigation settlement charge of $125 million in the year-ago
quarter, operating income showed an increase of 23% to $1,312
million. The series of investigation procedures will adversely
impact the company's future profits. Sans these investigation
costs, management reaffirmed its low to mid-teens growth guidance
in operating income for fiscal 2012, with a prejudice towards the
lower end of the guidance range.
The guidance appears to be somewhat conservative, as management
fears that the results of the Film Entertainment segment would
struggle during the fourth quarter on account of difficult
comparison when compared with the prior-year quarter due to the
successful release of Rio and X-Men last year. Moreover, the result
will also be adversely affected by the cost related to the big
releases scheduled for June and July. Management further added that
total adjusted operating income would also be impacted due to lower
contribution from the Publishing segment versus the year-ago
quarter, which benefited from one extra week - the 53rd week.
Another media conglomerate and one of the competitors of News
Time Warner Inc.
) posted first-quarter 2012 quarterly earnings of 67 cents a share
that beat the Zacks Consensus Estimate of 64 cents, and increased
16% from 58 cents posted in the prior-year quarter. Total revenue
grew 4% to $6,979 million from the prior year-quarter and handily
beat the Zacks Consensus Estimate of $6,809 million.
Operating income at
Cable Network Programming
jumped 15% to $846 million, boosted by revenue growth, and reflects
a 17% increase in the domestic cable channels' operating income and
9% higher contribution from the international cable channels.
At the domestic cable channels, affiliate revenue grew 15%,
reflecting increased rates across all networks, with growth
primarily driven by Regional Sports Networks and the FOX News.
Advertising revenue climbed 10% on the back of growth registered
across all networks, but principally led by FOX News and the
National Geographic Channels.
At the international cable channels, affiliate revenue grew 31%,
reflecting growth at the Fox International Channels in Latin
America and Asia, and due to the consolidation of the Fox Pan
American Sports network. Advertising revenue rose 7% on improvement
witnessed in advertising marketplace and viewership trends with
strength witnessed particularly at Fox International Channels.
operating income rose 10% to $272 million, reflecting the success
of - theatrical releases, Alvin and the Chipmunks: Chipwrecked and
The Descendants, the home entertainment performance of Rise of the
Planet of the Apes, and pay television performance of Rio.
segment's operating income fell 11% year over year to $171 million,
as the prior-year quarter advertising revenue and operating profit
benefited from the broadcast of the National Football League Super
Bowl XLV, which was absent in the reported quarter. However, the
twofold rise in retransmission consent revenue offset the decline
to some extent.
Direct Broadcast Satellite Television
or SKY Italia
posted segment operating income of $40 million, reflecting a sharp
improvement from an operating income of $17 million in the year-ago
quarter, on the back of rise in advertising and subscription
SKY Italia ended the quarter with a subscriber base of 4.94
million, representing a reduction of about 86,000 subscribers on
account of sluggish economic environment in Italy.
segment reported an operating income of $130 million, down from
$161 million in the prior-year quarter, which excludes the
litigation settlement charge of $125 million. News Corporation
hinted that the drop in operating income was due to the closure of
the publication of 'The News of the World' in the United Kingdom,
and fall in advertising revenue at the Australian and U.K.
newspapers, partly offset by gains from Dow Jones, HarperCollins
and the integrated marketing services business.
segment posted an operating loss of $147 million, reflecting an
improvement of $18 million over the prior-year quarter attributable
to the absence of losses from the businesses divested, which
include Myspace, partially offset by an investigation charge of $63
Other Financial Details
News Corporation ended the quarter with cash and cash
equivalents of $10,686 million, total borrowings of $15,460
million, reflecting debt-to-capitalization ratio of 36%, and
shareholders' equity of $27,907 million, excluding non-controlling
interests of $538 million.
On July 12, 2011, the company's board of directors approved a
share buyback program that raised the remaining authorization of
$1.8 billion under the previous program to $5 billion. Through May
8, 2012, News Corporation has bought back approximately $3.9
billion of shares at a price of $17.51 per share.
The company's board of directors recently approved another $5
billion stock repurchase program, increasing the remaining
authorization of $1.1 billion under the previous program to $6.1
Currently, we have a long-term 'Neutral' recommendation on News
Corporation. Moreover, the stock holds a Zacks #3 Rank that
translates into a short-term 'Hold' rating.
NEWS CORP INC-A (NWSA): Free Stock Analysis
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