Despite economic turbulence and losing sheen in the stock market on account of the phone hacking scandal that resulted in the closure of the publication News of the World and abstinence from acquiring the remaining 61% stake in the British Sky Broadcasting Group, News Corporation (NWSA) posted first-quarter 2012 financial results that beat the Zacks’ expectations.
The better-than-expected results came in at a juncture that not only cheered the shareholders, but it diverted their attention from the recent ailments the company had been inflicted with. During the trading hours on Wednesday, News Corporation’s shares rose 1.3% or 21 cents to close at $16.90. The stock price inched up 1% or 17 cents to $17.07 in after hours trading.
Rupert Murdoch controlled News Corporation’s quarterly earnings of 32 cents a share came ahead of the Zacks Consensus Estimate of 29 cents, and rose 23% from 26 cents earned in the year-ago quarter. The prior-year quarter excludes a benefit of 3 cents a share related to tax matters.
On a reported basis, including one-time items, News Corporation informed that quarterly earnings came in at 28 cents, down 7% from 30 cents delivered in the year-ago quarter.
News Corporation, a diversified media conglomerate, hinted that total revenue jumped 7% year over year to $7,959 million, reflecting growth across Cable Network Programming (up 13%), Filmed Entertainment (up 18%), Television (up 8%), Direct Broadcast Satellite Television (up 8%) and Publishing (up 1%). The Other segment’s revenue plunged 51%. Total revenue also handily beat the Zacks Consensus Estimate of $7,645 million.
Total segment operating income soared 21% to $1,385 million during the quarter. Management reaffirmed its low to mid-teens growth in operating income for fiscal 2012.
Another media conglomerate, Time Warner Inc. (TWX), one of the competitors of News Corporation, posted third-quarter 2011 earnings of 79 cents a share that beat the Zacks Consensus Estimate of 75 cents, and surged 27% from 62 cents earned in the prior-year quarter on the heels of the box office success of ‘Harry Potter and the Deathly Hallows: Part 2’ by Warner Brothers, higher television advertising demand and increase in television license fees. Total revenue grew 11% to $7,068 million from the prior year-quarter, and handily beat the Zacks Consensus Estimate of $6,952 million.
Segment Discussion
Operating income at Cable Network Programming jumped 18% to $775 million due to growth in revenue, and reflecting a 16% increase in the domestic cable channels operating income and 25% higher contribution from the international cable channels. Both advertising and affiliate revenues increased riding on a rise in contributions from FX Network, STAR India Channels, the Regional Sports Networks and Fox International Channels.
At the domestic cable channels, advertising and affiliate revenues grew 13% and 9%, respectively. At the international cable channels, advertising and affiliate revenues grew 23% and 24%, respectively.
Filmed Entertainment posted an operating income of $347 million up 24% from the prior-year quarter reflecting the success of – 'Rise of the Planet of the Apes,' which generated box office receipts of more than $450 million and the home entertainment performance of 'Rio' and 'X-Men: First Class.'
Television segment’s operating income surged 27% to $133 million from the year-ago quarter, reflecting higher broadcast network advertising revenue aided by sturdy national advertising marketplace, and rise in retransmission consent revenue. These were to some extent were offset by rise in marketing expenses and a drop in local political advertising revenue at the local television stations.
Direct Broadcast Satellite Televisionor SKY Italia posted segment operating income of $119 million, soared 45% from the year-ago quarter, on the back of reduced programming expenses due to the absence of FIFA World Cup costs and a fall in marketing expenses.
SKY Italia ended the quarter with a subscriber base of over 5 million, representing an addition of about 34,000 subscribers during the quarter.
Publishing segment reported an operating income of $110 million, down 38% from the year-ago quarter. News Corporation hinted that the drop in operating income was due to closure of the publication of News of the World, and fall in advertising revenue at the Australian newspapers. These were to a degree offset by rise in advertising and circulation revenues at ‘The Wall Street Journal’.
TheOther segment, posted an operating loss of $99 million, portraying an improvement of $57 million from the year-ago quarter, on account of absence of losses from Myspace.
Other Financial Details
News Corporation ended the quarter with cash and cash equivalents of $11,429 million, total borrowings of $15,446 million, and shareholders’ equity of $27,366 million, excluding non-controlling interests of $490 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 October 31, 2011, News Corporation has bought back approximately $1.9 billion of shares at a price of $16.50 per share.
Currently, we have a long-term Neutral rating on News Corporation. However, the stock holds a Zacks #2 Rank that translates into a short-term Buy recommendation.
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