News Corp’s third quarter results were boosted by Avatar and another strong showing by the group’s cable business, but investors were not all that impressed.
They focused on forecasts of a slower and lower fourth quarter won’t be so lucky and as News bosses warmed up the market to expect lower earnings.
In a conference call, the company senior executives said a $US100 million drop in film revenue will cut fourth quarter earnings, and therefore results will be lower from a year ago.
The news knocked News Corp shares 3.8% lower in US after hours trading yesterday.
They had earlier fallen 4% in the big sell-off that racked world markets overnight. That halved the 12% rise this year in half.
In Australia later they fell again, losing nearly 5%, or 95c, to $18.85.
It was only a week ago that news shares hit their 52 week high in Australia of $20.18.
The company’s head beancounter, CFO, David DeVoe, told a teleconference that the fourth-quarter results will fall from a year earlier on lower performances by the film division and the Fox broadcast network.
The Avatar surge will ease, despite taking an estimated $US2.7 billion in all forms of takings so far.
That helped pushed News’ third quarter revenues up 19% and pre-tax earnings up 55% to $.125 billion.
But the expected fourth quarter easing in earnings growth won’t stop News earnings up closer to 30% instead of just over 20%, which was the forecast a year ago.
Murdoch and News are swimming in cash.
Despite redeeming $US1 billion of debt securities during the quarter, News ended March with more than $US8.2 billion, up from $US6.5 billion.
This is when Murdoch is at his most extravagant and dangerous; it’s when he overpays for acquisitions, as he did in 2007 when he paid what turned out to be 50% more for the Dow Jones Company (The Wall Street Journal) than he need have.
He paid $US5.6 billion for it and wrote off more than $US2.8 billion in 2008.
Mr Murdoch said he was considering such options as dividends, stock buybacks and reinvesting in company businesses.
Mr Murdoch was very upbeat, sounding optimistic.
The gloom of 12 to 18 months ago has gone and he talked confidently of rebound, saying, "The advertising market is currently seeing strong across-the-board growth, particularly in the US and Britain”.
Newspapers including the Wall Street Journal, reported advertising up 25%, and UK titles including The Sun and The Times, up 10%. But circulation revenues in the UK fell 4%, a negative glossed over.
Costs cuts and the ad bounce-back at the Journal and in the UK papers, lifted newspaper operating profits to $US131 million, a jump of $US102 million.
News is due to erect its internet paywall around the Times and Sunday Times next month.
But in Australia, the quarter was line ball.
"The Australian newspaper group reported third quarter results in line with the prior year in local currency terms.
"Advertising revenues, in local currency terms, were up 4% compared with the prior year quarter reflecting stronger display revenue in the retail and real estate sectors.
"The increased advertising revenue was offset by higher newsprint expenses and costs associated with various initiatives.”
The overall result was led by the cable networks unit, where operating income jumped 38% to $US588 million, thanks to strong performances from Fox News up 31% (being anti-Obama pays for Murdoch) and its regional sports networks among others.
The success of "Avatar" lifted operating income at the filmed entertainment division, jumping 76% to $US497 million.
