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Shares of News Corp. Touch New High

by Zacks Equity Research

April 03, 2013 | Comments : 0 Recommended this article: (0)

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Shares of News Corporation ( NWSA - Analyst Report ) reached a new 52-week high of $31.13 on Tuesday, Apr 2, owing to the company’s strategic initiatives aimed at enhancing its long-term profitability.

News Corporation’s stock eventually closed at $31.03, rising 16.9% year to date. The company currently trades at a forward P/E of 18.45x, at par with the peer group average.

News Corporation is poised to benefit from increased Television revenues due to sustained growth in retransmission consent revenues. Alongside it is expected to generate strong affiliate fee growth through higher rates and a strengthened subscriber base.

The company is also focusing on enhancing its portfolio of regional sports channels to solidify the company’s Fox Sports Media Group’s position in the lucrative sports entertainment business, where it competes with Walt Disney Company’s ( DIS - Analyst Report ) sports coverage network, ESPN.

Moreover, News Corporation is on the verge of splitting its operations into 2 separate publicly traded publishing and entertainment entities. We believe that the split will augur well for News Corporation, as it will facilitate the company to focus on creating a much more profitable entertainment company (to be named as Fox group) including Fox broadcasting, cable network, Fox News Channel, the 20th Century Fox movie studio, BSkyB, Sky Italia, Sky Deutschland, and pay-TV operations in Europe and India.

Further, the company stated that its new publishing company (to be known as News Corporation) will commence operations with $2.6 billion in cash and no debt. With adequate cash, the new News Corp. will be better positioned than its peers, The New York Times Company ( NYT - Analyst Report ) and Gannett Co., Inc. ( GCI - Analyst Report ) to look for strategic acquisitions and expand its business.

Currently, shares of News Corporation maintain a Zacks Rank #3 (Hold).

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