News Corp 3Q beats Street despite probe costs
Wednesday, May 9, 2012
LOS ANGELES (AP) — Rupert Murdoch's News Corp., the global media conglomerate under fire for phone hacking and alleged bribery in Britain, posted a 47 percent increase in third-quarter net income thanks to strong performances at its U.S. pay TV networks and movie studio.
The results beat analyst expectations. The company also announced it would buy back another $6.1 billion worth of shares in the coming year — on top of the $3.9 billion worth it bought in the last 11 months — a move that should bolster News Corp.'s stock and assuage lingering fears that Murdoch might squander company cash on expensive acquisitions.
The company's shares rose 51 cents, or 2.6 percent, to $19.89 in after-hours trading.
News Corp.'s shares have traded at a discount to its media peers because of what investors view as its poor use of cash, which is generated mainly from pay TV networks such as Fox News and its broadcast TV stations. With its planned takeover of British Sky Broadcasting derailed by the hacking scandal, analysts welcomed the share buyback plan.
"It's comforting to see them buying back stock," said Lazard Capital analyst Barton Crockett. He added that the company "delivered much better earnings than I was looking for."
Net income in the three months to March 31 rose to $937 million, or 38 cents per share, from $639 million, or 24 cents per share, a year ago.
Excluding unusual items such as the $63 million in legal bills to deal with the ongoing investigation of its British newspaper unit, adjusted earnings came to 37 cents per share, beating the 31 cents expected by analysts polled by FactSet.
Revenue rose 2 percent to $8.40 billion, beating the $8.25 billion analysts expected.
Pay TV revenue rose 16 percent bolstered by rising fees from distributors at home and abroad and a 10 percent rise in U.S. ad revenue. Movies revenue rose 11 percent as films in various stages of release such as "Alvin and the Chipmunks: Chipwrecked," ''The Descendants" and "Rise of the Planet of the Apes" did better than standouts from last year's third quarter including "The A-Team," ''Knight and Day" and "Unstoppable."
News Corp. reiterated its forecast for its full-year adjusted operating profits to grow in the "low to mid-teen" percentages from the $4.98 billion posted nearly a year ago. Its fiscal year ends June 30. The company said, however, that its results are likely to be on the low end of the range because of a slowdown at the 20th Century Fox movie studio and weak ad markets at its international newspapers.
The forecast excludes scandal-related charges, which have come to $167 million for the first nine months of the fiscal year.
Chief Operating Officer Chase Carey repeated the company's defense of Murdoch, News Corp.'s founder, controlling shareholder and CEO who was blasted in a U.K. parliamentary committee report last week as being unfit to run a major international company.
"Both the board and I rebuff any notion that he is unfit to run this company," Carey said.
Murdoch, 81, was not present on the quarterly conference call.
The British hacking probe has forced News Corp. to postpone its bid to increase its 39 percent stake in BSkyB. The U.K. lawmakers' report raises questions about whether the U.K. communications regulator, OfCom, will find that BSkyB is not "fit and proper" to hold a British broadcasting license. That could force News Corp. to shed its stake, worth more than $7 billion.
Carey repeated the position that the company prefers to "either own and operate or monetize" businesses. In other words, News Corp. prefers to have a controlling stake in a business or sell it completely. However, he said there is no time frame for potentially divesting BSkyB.
"We feel comfortable staying the course with BSkyB for a long time," he said.
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