by Zacks Equity ResearchJanuary 17, 2013 | Comments : 0 Recommended this article: (0)
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The stocks momentum can be attributed to a sustained increase in its Cable Networks segment and growth at international channels, as well as increased advertising and affiliate revenues. These factors were on display in its fiscal first-quarter 2013 results, which included year-over-year earnings per share growth of 34% and a positive surprise of 13.2%.
Impressive Bottom-Line Result
On November 6, News Corp. reported fiscal first quarter 2013 earnings of 43 cents per share, beating the Zacks Consensus Estimate of 38 cents and the prior-year result of 32 cents. Over the past 6 quarters, the company has beaten 5 times and matched once, amassing an average surprise of 12.4%.
Total revenue rose 2% year over year to $8,136 million on account of revenue growth across the Cable Network Programming (up 16% to $2,449 million) and Television (up 4% to $959 million) segments, partially offset by lower revenues for Filmed Entertainment (down 2% to $1,745 million), Direct Broadcast Satellite Television (down 11% to $817 million) and Publishing (down 2% to $2,018 million). The Other segments revenue inched up 1% to $148 million. Total revenue fell short of the Zacks Consensus Estimate of $8,226 million.
Total segment operating income increased 3% year over year to $1,450 million. Management anticipates a high single to low-double digit growth rate in operating income for fiscal 2013.
Over the past 90 days, the Zacks Consensus Estimate for fiscal 2013 rose 1.2% to $1.73 per share. For fiscal 2014, the Zacks Consensus Estimate is $2.02 per share, reflecting an increase of approximately 1% over the same time frame.
Valuation Stretched, Yet Lucrative
News Corp. currently trades at a forward P/E of 15.90x, reflecting a 0.3% premium to the peer group average of 15.85x. Its price-to-book ratio of 2.43 is at a substantial premium to the peer group average of 1.49. Given the companys compelling fundamentals, the premium valuation is justified and well supported by its long-term estimated EPS growth rate of 16.7% versus 5% for the peer group.
With respect to return on assets (ROA), the stock looks attractive. It has a trailing 12-month ROA of 6.2%, which is substantially higher than the peer group average of 2.9%.
The stock has been largely trading above its 200-day moving average since December 19, 2011. It has also remained above the 50-day moving average since November 28, 2012. Volume averages roughly 2,941K daily. The year-to-date return for the stock is 46.4% compared with the S&P 500s return of 14.2%.
Founded in 1922 and headquartered in New York, News Corp., is a diversified global media company operating under six reporting segments: Cable Network Programming (which includes STAR Group Limited); Filmed Entertainment; Television; Direct Broadcast Satellite Television; Publishing; and Other. News Corp., which primarily competes with Time Warner Inc. (TWX), has a market cap of $64.5 billion.
On June 28, 2012, News Corp. announced its decision to split into two separate publicly traded publishing and media and entertainment entities. The split is expected to take a year. The Publishing Company will be composed of the publishing businesses, education unit and the integrated marketing services business. The Entertainment Company will include cable and television assets, filmed entertainment, and the direct satellite broadcasting businesses.
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