) second-quarter fiscal 2013 earnings of 44 cents a share beat
the Zacks Consensus Estimate by a couple of cents, and rose 12.8%
from 39 cents earned in the prior-year quarter on the back of
healthy growth across Cable and Television operations coupled
with improvement witnessed at the Publishing division. However,
SKY Italia remained a drag on the quarter. Share repurchase
activity also provided cushion to the bottom-line by 3 cents a
Including one-time items, News Corporation posted quarterly
earnings of $1.01 per share, which more than doubled from 42
cents delivered in the year-ago quarter.
Time Warner Inc.
), one of the peers of News Corporation, posted fourth-quarter
2012 adjusted earnings of $1.17 per share that surpassed the
Zacks Consensus Estimate of $1.10 and surged approximately 24%
year over year.
News Corporation, a diversified media conglomerate, stated
that total revenue rose 5% year over year to $9,425 million on
account of revenue growth across Cable Network Programming (up
18% to $2,559 million), Television (up 1% to $1,532 million),
Publishing (up 1% to $2,149 million) and Filmed Entertainment
segments (up marginally by 0.2% to $2,067 million), partially
offset by declines at Direct Broadcast Satellite Television
division (down 6% to $890 million). The Other segment's revenue
surged 48% to $228 million. Total revenue also came ahead of the
Zacks Consensus Estimate of $9,263 million.
Total adjusted segment operating income increased 5% year over
year to $1,659 million during the quarter. Management now
projects mid to high single-digit growth rate in operating income
for fiscal 2013, down from high single to low-double digit growth
rate forecasted earlier, as News Corporation anticipates
lower-than-expected performance from SKY Italia, the Fox
Broadcast Network and the Australian newspapers.
Management anticipates channels businesses to deliver healthy
earnings growth on the back of a sustained increase at Cable
Networks and growth at international channels, as well as
increase in advertising and affiliate revenues buoyed by FOX
News, Regional Sports Networks and FX Network.
The company is also focusing on enhancing its portfolio of
regional sports channels to strengthen the company's Fox Sports
Media Group's position in the lucrative sports entertainment
business, where it competes with
Walt Disney Company
) sports coverage network, ESPN.
In order to bolster its position in regional sports television
business, News Corporation acquired the regional sports network,
Sports Time Ohio and a 49% stake in the Yankees Entertainment and
Sports Network in Dec 2012. In Nov 2012, the company acquired the
remaining 50% stake in ESPN STAR Sports, which was a joint
venture with The Walt Disney Company. Later, News Corporation
changed its name to Fox Star Sports Asia. The company is also set
to launch Fox Sports Japan.
The company's list of acquisitions also includes Eredivisie
Media & Marketing (acquired 51% stake) and Consolidated Media
Holdings Ltd. In Jan 2013, News Corporation increased its stake
in Sky Deutschland to 55%.
Operating income at
Cable Network Programming
jumped 7% from the prior-year quarter to $945 million, boosted by
revenue growth, reflecting an escalation of 9% in the domestic
cable channels' operating income, buoyed by growth across the
Regional Sports Networks (RSNs), FX Network, Fox News Channel and
National Geographic Channels, partly offset by higher programming
expenses. Contribution from international cable channels rose 3%
gaining from robust operating income growth at the non-sports
channels at Fox International Channels (FIC) and Star.
At the domestic cable channels, affiliate revenue grew 13%,
signifying increased rates across all networks, with growth
primarily driven by Regional Sports Networks and the Fox News
Channel. Advertising revenue climbed 8%.
At the international cable channels, affiliate revenue grew
42%, reflecting improvement at FIC and STAR, and gain from the
inclusion of Fox Pan American Sports and Fox Star Sports Asia,
partly mitigated by the strong U.S. dollar. Advertising revenue
's operating income edged down 3% year over year to $383 million.
The quarter marked the theatrical release of
Life of Pi
globally, and home entertainment performance of
Ice Age: Continental Drift.
The year-ago quarter benefited from home entertainment
Rise of the Planet of the Apes
X-Men: First Class
segment's operating income grew 19% year over year to $224
million on the back of an over twofold rise in retransmission
consent revenue and higher local advertising at the Fox
Television Stations, benefiting from political advertising
revenue, partially offset by fall in national advertising revenue
due to soft ratings at the Fox Broadcast Network and 3 lesser
World Series games this year.
Direct Broadcast Satellite Television
or SKY Italia
posted a segment operating loss of $20 million, demonstrating a
sharp decline from an operating income of $6 million in the
year-ago quarter due to increased programming costs and the
strong U.S. dollar. Management anticipates to lower cost base by
$200 million over the period of 2 to 3 years.
SKY Italia ended the quarter with a subscriber base of 4.83
million, representing a net reduction of 28,000 subscribers on
account of the sluggish economic environment in Italy.
segment reported an operating income of $234 million, up 7% from
the prior-year quarter. News Corporation hinted that rise in
operating income was attributed to higher contributions from the
U.K. newspapers and the buyout of Thomas Nelson, Inc., a
Christian book publisher. This was partially offset by waning
advertising revenue at the Australian newspapers.
segment posted an operating loss of $186 million compared with a
loss of $191 million in the prior-year quarter.
Other Financial Details
News Corporation ended the quarter with cash and cash
equivalents of $7,806 million, total borrowings of $16,457
million, reflecting debt-to-capitalization ratio of 36.9%, and
shareholders' equity of $28,152 million, excluding
non-controlling interests of $853 million.
On May 9, 2012, the company's board of directors approved a
share buyback program that raised the repurchase authorization to
$10 billion from $5 billion. Through Feb 5, 2013, News
Corporation bought back approximately $6.3 billion of shares at a
price of $19.13 per share.
News of the Split
The major news regarding News Corporation that hit the
headlines was its decision to split into two separate publicly
traded publishing and media and entertainment entities. The split
is expected to be concluded by the year end.
The Publishing Company will comprise publishing businesses,
education unit and the integrated marketing services business. On
the other hand, Entertainment Company will include cable and
television assets, filmed entertainment, and direct satellite
Currently, News Corporation holds a Zacks Rank #3 (Hold).
Other stock to consider in the media sector is
Lions Gate Entertainment Corp.
), which holds a Zacks Rank #1 (Strong Buy) and looks
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