News Corp. Just Smashed The Street

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News Corp. just smashed the Street’s expectations delivering big beats on both the top and bottom line.

  • The company reported an adjusted EPS of $0.25, versus $0.20 expected for the December quarter.
  • Revenue was $8.7 billion versus an expected $8.23 billion.
  • Operating income was $1.2 billion blowing away the expected $981 million.
  • The company is raising the dividend by 25% to $0.075 per Class A share and Class B share.

Shares are up after hours.

MySpace no longer gets broken out, it’s stuffed in with “other.” In that section, we learn that the digital media portion of the company saw operating income decrease by $32 million compared to a year prior “due to lower search and advertising revenue.”

The Wall Street Journal saw advertising increases. The print edition had 5% higher year-over-year advertising revenue, and there was 17% year-over-year growth in advertising at The Wall Street Journal Digital Network

The newspaper division as a whole had a solid showing with $259 million in operating income.

Here’s a preview of the quarter from Imran Khan of JP Morgan, with our notes in brackets on how News Corp. performed:

  • We expect Cable Network’s Programming (key to our OW thesis) operating income growth of 19%. We are modelling $509M in operating income in Q2 FY10. [It was $604 million, a 35% growth.]
  • Improving advertising trends at the Television segment. We expect $9M in operating income and believe the segment profitability may have room for upside: Television delivered $1.1B in operating income in FY08 while we are modelling $160M for this fiscal year. We also note that this segment will benefit from the growth in retransmission revenue and we will look for management to comment on the expected timing of re-negotiations. [Television segment was $29 million in operating income.]
  • Film is likely to be strong, we expect $321M in operating income; [Filmed entertainment had $324 million in operating income.]
  • Newspapers should report $197M in operating income. [Newspapers had $259 million, “driven by increased advertising revenues at The Wall Street Journal and lower operating expenses throughout all the newspaper businesses.”]
  • We expect Sky Italia to remain challenging. We expect Sky Italia to report operating loss of $25M. Despite challenging regulatory and competitive environment we still think it will generate $250M in operating income this year. [Operating loss was $30 million.]
  • Guidance will be key for stock performance; we expect the company to revise the guidance upwards from the current range of high single to low double digit operating income growth to reflect Avatar performance levels and improving macro environment.

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