Bloomberg News

News Corp. Beats Profit Estimates on Higher Cable-TV Growth

May 09, 2013

News Corp. Beats Profit Estimates on Higher Licensing Revenue

Under the plan to divide News Corp., a new company, 21st Century Fox, will own the 20th Century Fox film studio and the Fox pay-TV and broadcast networks as well as Fox Sports 1, the forthcoming cable sports channel. Photographer: Timothy A. Clary/AFP via Getty Images

News Corp. (NWSA), the Rupert Murdoch-led media company planning to split in two, rose the most in more than 10 months after third-quarter profit beat analysts’ estimates.

The shares rose 4.5 percent to $33.29 at the close in New York. The shares have advanced 30 percent this year.

Net income tripled to $2.85 billion in the period ended March 31, New York-based News Corp. said yesterday in a statement. Profit excluding some items was 36 cents a share, versus the 35-cent average of analyst estimates compiled by Bloomberg. The shares rose as much as 4 percent to $33.15 in extended trading.

Results at the television businesses underscore Murdoch’s decision to cleave entertainment from the declining publishing unit, where earnings sagged 35 percent. Cable-network revenue rose 17 percent, led by international growth in fees from pay-TV systems and advertising. Payments to rebroadcast the Fox network on cable and satellite TV almost doubled.

“These were good numbers,” David Bank, an analyst with RBC Capital Markets in New York, said in an interview. “The company’s performance highlights how strong the flagship business is, which is the cable channels.”

Net income, amounting to $1.22 a share, was boosted by gains from transactions involving the Sky satellite-TV business in Germany, New Zealand and the U.K. In the year-earlier period, profit was $937 million, or 38 cents. Operating income rose 3.8 percent. Sales advanced 14 percent to $9.54 billion, surpassing the $9.17 billion average estimate.

New Companies

The proposed split should happen “near the end” of the fiscal year that runs through June, Murdoch said. Total costs for the spinoff reached $53 million through the end of March, almost half of it coming in the most recent quarter.

“I am more confident than ever of the long-term value the separation will unlock for the company and its shareholders,” Murdoch said in the statement.

The plan to divide News Corp. (NWSA:US) creates a new company, 21st Century Fox, that will own the 20th Century Fox film studio and the Fox pay-TV and broadcast networks as well as Fox Sports 1, the cable sports channel that will compete with Walt Disney Co. (DIS)’s ESPN. The parent company of the Wall Street Journal and the Sun newspaper will retain the News Corp. name.

‘American Idol’

One weak spot in the results was the Fox television network, where ratings declined at cornerstone programs including “American Idol.”

The company is working to improve its lineup, with an eye to finding shows that resonate with audiences fragmented by the rise of new digital formats, Chief Operating Officer Chase Carey said on a conference call with analysts.

“It was not a year where we achieved what we set out to,” Carey said. “In a world where everybody has more and more choices, you need shows that stand out.”

Next week, Fox will unveil its lineup of new shows at the so-called upfront meetings when marketers buy large amounts of advertising spots at discounted rates for the following season.

The publishing division, which will include News Corp.’s Australian TV assets after the split, cited a drop in advertising at the company’s Australian newspapers for the profit decline.

Publishing will start with $2.6 billion in cash and no debt, the company said in March. The division lost $2.1 billion in fiscal 2012 because of restructuring, falling sales and the costs of a U.K. hacking scandal.

Publishing Company

Murdoch appointed Robert Thomson, the Wall Street Journal’s editor, as CEO of the new publishing company, which also includes the New York Post, HarperCollins books, and the Amplify education division run by board member Joel Klein.

Murdoch, 82, who will remain chairman at both companies after the split, hasn’t yet proposed full board slates at either of them.

In the nine months ended March 31, News Corp. spent $165 million related to investigations in the U.K., down from $167 million in the year-earlier period. Last month, News Corp.’s directors agreed to a $139 million settlement of investors’ claims that they turned a blind eye to illegal conduct at the media company, including phone hacking by employees. The money will ultimately be recovered through insurance that covers News Corp.’s board.

News Corp. journalists are accused of hacking mobile-phone messages of more than 600 people, including U.S. actors Brad Pitt and Angelina Jolie, soccer player Wayne Rooney and murdered British schoolgirl Milly Dowler.

Investors have renewed calls for the company to split the roles of chairman and CEO. Christian Bros. Investment Services and British Columbia Investment Management Corp. filed a joint shareholder proposal calling for an independent chairman. They also backed calls to eliminate the dual-class share structure that gives the Murdochs control of the company.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


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Companies Mentioned

  • NWSA
    (News Corp)
    • $17.22 USD
    • 0.19
    • 1.1%
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