News Corp (NWS) reported a mixed Q1, outpacing revenue estimates ($8.75 billion vs. $8.65 billion consensus), but missing slighly on adjusted EPS ($0.30 cents vs. $0.31 consensus). Most of the revenue upside came from TV, where NWS benefitted from lower production costs due to the WGA strike and stronger than expected scatter (TV adds bought at the last minute). Deutsche Bank is maintaining its leaving its target ($31) and estimates unchanged. It thinks NWS is cheap:
News Corp. continues to post strong growth momentum, yet trades at the very low end of sector valuations. While lack of capital return to shareholders, complexity and incremental dilutive acquisitions [Dow Jones, Premiere] are hampering investor sentiment and valuation, we believe Newscorp continues to grow the value of its businesses and is overly cheap at only 6.8x CY08E EV/EBITDA.
Concerns about production costs edging back up after the end of the WGA strike, however, prevent DB from raising its target and estimates:
While nicely ahead for F3Q08, we expect the strike impact benefiting F3Q to hamper F4Q, and Film to grow nicely in F4Q, just not as strong as initially anticipated, and thus are leaving FY08 and FY09 EBIT unchanged.
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