News Corp. Beats Estimates on Growth in Advertising, Fox News

News Corp. Tops Profit Estimates on Ad Gains
Pedestrians walk past News Corp. headquarters in New York. Photographer: Scott Eells/Bloomberg

News Corp., owner of the Fox broadcast network and cable channels such as Fox News and FX Network, beat analysts’ profit estimates on stronger-than-expected gains in the U.S. and international advertising.

Profit excluding some costs climbed to 32 cents a share in the fiscal first quarter ended Sept. 30, the New York-based company said yesterday in a statement. Analysts had projected 29 cents, the average of 22 estimates compiled by Bloomberg. Revenue for the quarter climbed 7.2 percent to $7.96 billion, beating the average analyst estimate of $7.66 billion.

News Corp.’s cable networks, the biggest contributor to profit, increased revenue 13 percent to $2.12 billion, while operating income rose 18 percent to $775 million. U.S. advertising sales at the unit, which includes Fox News and FX Network, grew 13 percent, while affiliate revenue, or the fees charge to cable distributors, climbed 9 percent.

“Domestic advertising up 13 percent is really incredible in this environment,” said David Bank, an analyst with RBC Capital Markets in New York. “The cable-network business was stronger than we expected.”

The broadcast-television unit, including the Fox network and local stations, boosted operating income 27 percent as revenue increased 8.5 percent. So-called retransmission fees, payments from cable operators for programming, more than doubled.

Net income fell 4.8 percent to $738 million, or 28 cents a share, from $775 million, or 30 cents, last year. The company recorded a $91 million pretax restructuring charge primarily related to the British newspapers business.

Murdoch’s Control

The results may help Chief Executive Officer Rupert Murdoch, 80, maintain control at News Corp., Bank said. The company has been fighting criticism of management after a phone-hacking scandal at one of its London newspapers. Investors called for a governance overhaul at the annual meeting last month.

“The ongoing controversy at the company has little to do with its operating issues,” said Bank, who recommends the stock and doesn’t own it.

News Corp. has repurchased $1.9 billion worth of stock since announcing a buyback in July as part of a $5 billion reauthorization program.

“We like the buyback,” said Christopher Marangi, a fund manager at Rye, New York-based Gamco Investors Inc., which held 6.18 million Class A shares as of November, according to data compiled by Bloomberg. “The silver lining to the scandal is that deployment of cash flow appears to be directed in a more appealing way to shareholders.”

Segment Results

News Corp., also the owner of the Twentieth Century Fox studio, rose 1.3 percent to $16.90 in New York at the close yesterday. The Class A shares have gained 16 percent this year.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. and its Dow Jones division in providing financial news and data.

Profit in publishing, which includes newspapers such as the Wall Street Journal and books, fell 38 percent as revenue was little changed.

News Corp.’s filmed entertainment unit boosted revenue 18 percent as operating income climbed 24 percent. The company’s “Rise of the Planet of the Apes” has drawn $453 million in theaters worldwide, according to Box Office Mojo.

No Dodgers Deal

The company doesn’t plan to buy the Los Angeles Dodgers, Chief Operating Officer Chase Carey said on a conference call with investors. The company’s Fox Sports was considering taking part in an auction of the bankrupt baseball team, a person familiar with the company’s thinking said today.

Carey said the company takes seriously investor voting at the annual meeting last month. One-third of the shareholders voted against the election of Murdoch’s sons to the board.

James Murdoch, 38, the deputy chief operating officer of the company and the CEO’s son, garnered the highest percentage of votes against his election with 35 percent at the company meeting last month. Not counting Rupert Murdoch’s voting stake, 67 percent of Class B shareholders voted against James. He will reappear before a U.K. government committee on Nov. 10 to answer further questions about his knowledge of the extent of hacking at its newspapers.

Still, News Corp. plans no changes in the son’s role at the company, Carey said.

“We have great confidence in James,” he said.

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