News Corp. (NYSE: NWS), whose competitors include CBS (NYSE: CBS), Disney (NYSE: DIS), Time Warner (NYSE: TWX), General Electric's (NYSE: GE) NBC Universal, Sony (NYSE: SNE), and Viacom (NYSE: VIA), reported earnings for the fiscal first quarter on Wednesday after the market closed. The stock was down over 11% in the after-hours trading session.
What happened? Do you really need to ask? Hard times beget hard guidance, my friends. CEO Rupert Murdoch is trying to be honest with his shareholders. News Corp. is bracing for a slowdown in advertising and DVD sales. And as for the bottom line, the media conglomerate didn't beat estimates with its Q1 net income of $0.20 per share. Wall Street was looking for three more pennies.
Revenue increased 6%, at least. However, according to the press release, one of my favorite metrics dipped severely during Q1. Granted, this is only the first quarter, but net cash from operations took a hideous plunge of 70%. I'm sure Murdoch didn't like seeing that. One thing I hope he takes very seriously is the need to cut costs. He stated that this will be a priority.
One of my pet peeves is the ridiculous amount of compensation and profit participation celebrities receive for their involvement in content production. I think those kinds of expenditures must be cut as deeply as possible. Gone are the days when a star guarantees a hit. I know Murdoch probably wasn't thinking of costs in those terms, but I'll throw it out there anyway. I mean, are shareholders of News Corp. pleased to see their stock wallowing in the single digits while Hollywood productions continue to callously use their capital? I have to believe (or maybe hope might be the better term) that more news stories will be commenting on this subject as the bear market proceeds.
Well, looking at News Corp., I have to say that the stock probably is cheap on a long-term basis. It has an incredible portfolio of assets. Of special consideration is the company's cable properties, which should grow nicely over time. However, the stock, like the rest of the market, will most likely be pressured as economic data continue to roll in. So, I do see it pulling back from current levels. But if it goes below the 52-week low of $7.70 (and I have a feeling it will at some point), then the stock is simply begging to be looked at.
Disclosure: I own Disney, GE; positions can change at any time.
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