Earnings Preview: News 3Q sales seen flat

LOS ANGELES

News Corp., the Rupert Murdoch-run media conglomerate dogged by a hacking and bribery scandal in Britain, reports its third-quarter earnings after the market closes on Wednesday. Analysts expect profit to increase from a year ago but revenue to be roughly flat.

WHAT TO WATCH FOR: Signs of a renewed share buyback plan from the owner of the Fox broadcast network and Wall Street Journal. Despite the still-unfolding scandal in Britain, non-voting Class A shares of News Corp. have been buoyed with the help of a $5 billion share buyback plan that is more than three-quarters complete.

One reason why the company would commit to transferring more capital back to shareholders is that it may be forced to sell its 39 percent stake in British Sky Broadcasting, which is worth about $7.5 billion at current stock prices and exchange rates.

The lucrative satellite TV operator is being investigated by Britain's communications regulator, OfCom, to determine whether it and its owners are "fit and proper" to be broadcast licensees. A parliamentary committee said last week that Murdoch, 81, is "not a fit person to exercise the stewardship of a major international company."

Canaccord Genuity analyst Thomas Eagan says a sale of BSkyB is "not so bad" as the damage might be limited to a $1.6 billion tax bill on the gain in its investment. That translates to 65 cents per share. He said the company could use any proceeds to buy back more shares.

Global advertising trends will also be in focus.

WHY IT MATTERS: News Corp.'s assets reflect the appetite of businesses around the world for spending money on advertising. It controls media assets including the 20th Century Fox movie studio, TV stations, newspapers in the U.S., U.K. and Australia and pay TV distributors in Italy, Britain and Germany.

It is also a case study in corporate governance. The company is controlled by Murdoch, its founder and CEO, who leads a family trust that owns nearly 40 percent of News Corp.'s voting shares. How Murdoch runs the media empire and reacts to investigations in the U.K. are of interest to the public as well as critics of corporate governance and scholars of journalism.

WHAT'S EXPECTED: Analysts polled by FactSet expect 31 cents per share of adjusted earnings on $8.26 billion in revenue.

LAST YEAR'S QUARTER: The New York-based company posted 26 cents per share of adjusted earnings on revenue of $8.26 billion in revenue.