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August 09, 2007
News Corporation Looking Good
News Corporation (NWS) reported a very solid fourth quarter to wrap up a great fiscal 2007. Revenue and EBITDA rose 9% and 19%, respectively, with revenue comfortably beating estimates and operating income in line. The composition of operating income will please investors, however, as Cable Networks and Fox Interactive Media (MySpace) comfortably exceeded expectations offsetting a major shortfall at the impossible to forecast Filmed Entertainment segment.
NWS also offered favorable guidance for 2008 calling for operating income growth of "low teens." The outlook is based on similar fundamentals to 2007 which means that Sky Italia, Cable Networks, and Fox Interactive Media will be the drivers. The guidance also has a nice cushion for growth in 2009 and beyond as NWS plans to absorb $340 million in investment spending in 2008 vs. $180 million in fiscal 2007 (in FY07, operating income was over $4.4 billion). Half of that investment is for UK newspapers and will go away in 2009. Additional investments will be made in the Fox Business Channel, the Big Ten Network, and Eastern European TV stations. Each of these businesses should offer growth after a year or two of investment.
4Q results and the 2008 outlook give me increased confidence in my bullish outlook for NWS. I expect to be a buyer of the shares in the near future.
Other highlights form the press release and conference call include...
Filmed Entertainment is off to a good start in 2008 with Fantastic Four, Live Free or Die Hard, and The Simpsons Movie all performing well at the box office. Each film will go through its profit windows during FY08.
My Space will more than double its revenues and profits in 2008 driven by a ramp in the Google deal and strength in advertising across the platform.
Cable Networks had a good upfront, especially for Fox News. International channels are growing rapidly and along with Fox News will drive 2008 growth similar to the 26% gain in 2007. Management used time on the conference call to discuss this segment feeling that it is underappreciated by investors.
Newspapers received little attention on the call. Results looked good on the service with revenues and EBITDA easily beating estimates. However, all of the strength is due to favorable currency as advertising and circulation revenues in the UK were negative and operating income in local currency only eked out a gain due to expense control.
Posted by Steve Birenberg at August 9, 2007 10:36 AM in NWS
1.What do you think of CETV's recent large sale of stock to one very wealthy businessman from the Ukraine?
2.Do you still believe that it is unlikely that a recession will occur in the U.S.A.that will effect significantly Europe/Asian markets and economies?
3.Besides CETV and MICC,are there any other media companies outside the U.S. that you find interesting?
1. I think the CETV stock sale is a nice positive. I have full paragraph set to up on this on Tuesday but it brings a very well connected person into the folsd who should be able to help CETV gain control of the licesne and station. He may also help them expand by buying new stations and networks.
2. I still believe a US recession is unliklely but the risk is real. I think foreign economies may slow more than Wall Street assumes if US growth slows.
3. I still own NIHD and RCI and took a very small position in TV in my own account last week. I also own LBTYA in my own account. No others on the radar at the moment.
Posted by: Steve at September 2, 2007 09:37 AM