News Corp. (NASDAQ: NWS), a media concern that competes with companies such as Time Warner (NYSE: TWX), Disney (NYSE: DIS), CBS (NYSE: CBS), and General Electric's (NYSE: GE) NBC Universal, issued its Q3 report on Wednesday after the bell. The numbers weren't that great, but you know what? The stock rallied anyhow in the after-hours session, rising over 3%. That's typical of what's been happening: Stocks are going higher even on weak news. Maybe the bears truly are heading back to hibernation.
News Corp. revenues declined by 16%. In terms of earnings, we'll look at operating income since, in this particular case, the numbers involve a lot of gains. This metric dropped 46%. And cash flow from operations for the nine-month period plunged well over 50%.
Do these numbers sound good to you? No, they don't. And one of the absolute worst drivers of the bad performance was the division dedicated to newspapers and information. Income at that segment was almost completely wiped out, dropping just about 97%! Yikes! Well, we all know how terrible the newspaper business is these days.
But News Corp. saw a similar decline in its television division too! The Fox network said that higher programming costs, in conjunction with lower ad prices, did not make a good combination. Well, News Corp. simply needs to do something about that. All media companies have to deal with escalating costs for programming. I'm just not sure when these media companies will finally get the memo (I've been sending a lot of them through my articles here, so I'm doing my part at least).
News Corp. should tell its Fox asset to play hardball with producers and talent and knock those ludicrous licensing fees down. Let's face it: Fox takes a huge risk in backing any show. A new formula for pricing should be developed that better reflects the risk that broadcast platforms take when they program a series in one of their valuable slots. Don't hold your breath, shareholders. Films and cable television did pretty well, though (not well enough, however, for me to forget everything else).
Now, when it comes to the stock, like I say, it seems like the market is ignoring the bad numbers lately. Has everything been discounted in? Admittedly, I've been missing a lot of these trades. Maybe I should put my own bearish nature into hibernation and start riding with the bulls. I don't know, I still feel we're due for a correction. And perhaps a big one at that. So, when I see numbers like these, I just don't feel a huge desire to rush out and take on some shares of News Corp.
The best I can tell you is that you may want to remain patient for a pullback below the psychological $10 level. On the one hand, I agree, News Corp. probably is cheap at these levels. On the other hand, I hate to buy into strength. At some point, I may have to.
Disclosure: I own Disney, GE; positions can change without notice.
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Reader Comments (Page 1 of 1)
5-07-2009 @ 3:20PM
Kent said...
It's hard to compare New Corp with how the other networks and cable stations are doing in comparison. I think investors believe it's doing better than most. If you analyze it, it's hard to know how NBC, ABC and CBS are doing because their income statements are consolidated together with GE, Disney and Viacom respectively. They're probably tanking like other media outlets today.