News Corp: Goldman Cuts Estimates On Global Media Weakness

Goldman Sachs trims its News Corp (NWS-A) estimates after the media congolomerate reported a lackluster Q1. Revenue: $8.75 billion vs. $8.65 billion consensus, EPS: $0.30 vs. $0.31 consensus. Goldman is concerned about an impending global ad slowdown, which it expects will depress NWS TV revenues. Goldman:

We are lowering our FY 2008 EPS estimate to $1.16 from $1.19 previously, reflecting FIM investment and local TV revenue declines pacing in the high single digits vs our expectation for mid-single digits. Our FY 2008 ests imply OI growth of 16% ex-DJ vs company guidance of mid-teens growth.

There area a few positives, however:

our [FY2009] already below consensus estimates factor in a global ad slowdown (~3-5% yoy revenue decline at traditional ad businesses) and a slowing of FIM revenue growth to ~25% yoy vs ~70% in FY2008. However, News Corp remains poised to deliver above peer OI growth as it right-sizes under-monetized segments. Growth drivers include: 1) affiliate fee gains at Cable Nets from higher FOX News fees as Time Warner Cable resets in August, 2) margin expansion at SKY Italia, and 3) MySpace audience monetization.

 

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