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Media Stocks News Corp., Time Warner May Slip After Earnings (NWS, TWX, AAPL)


Media giants News Corp. (NYSE: NWS) and Time Warner Inc. (NYSE: TWX) both reported solid earnings for the first quarter of 2010 on the backs of hit movies and a resumption of advertising for print and TV. News Corp. earnings report included EPS of $0.32 on revenues of $8.8 billion. Analysts had been expecting EPS of $0.25 on revenues of $8.24 billion. Time Warner earnings included EPS of $0.62 on revenues of $6.32 billion, compared with an EPS estimate of $0.49 and revenues of $6.38 billion.

News Corp.’s top line got a huge boost from ‘Avatar’, the highest grossing film ever, which has added $2.7 billion to the company’s revenues since its release late last year. NWS earnings revealed News Corp. is sitting on a pile of cash, more than $8 billion, that the company is trying to figure out how to spend. Chairman/CEO Rupert Murdoch admitted that the company’s balance sheet is “inefficient” with so much cash, but the company is looking boosting dividends, buying back stock, investing more in the business, and “opportunistic investments.” That about covers the field, except of course for nice bonuses for the company’s executives.

TWX earnings showed big gains in operating income in each of its three operating segments. Operating income in the Network segment rose 28%, in Filmed Entertainment operating income grew 43%, and in Publishing it grew moved from a -$32 million loss in the same period a year ago to a $50 million profit.

Going forward, Time Warner expects annual adjusted EPS to rise by a percentage “at least in the mid-teens” from its 2009 annual adjusted EPS of $1.83. Using a range of 13%-17%, that translates to $2.07-$2.14. Analysts had been estimating annual EPS at $2.15, so this is a little weak.

News Corp.’s forecast for the rest of the year was even weaker. The company did not provide guidance, but did say that operating income in June would be lower due to timing issues with movie releases, higher expenses at FOX network, and concerns about revenues in the TV businesses.

News Corp.’s Murdoch apparently loves the Apple (NASDAQ: APPL) iPad. He noted that the device now hosts 64,000 users for the company’s Wall Street Journal app and that News Corp. gets to keep all the subscriber revenue. Murdoch is also trying to convince other media companies to join him in moving content behind pay walls and offering their content only by subscription. He promised to say more about his plan within a month.

News Corp. shares are down more than 5% today and Time Warner shares are down about 1%. Both are being affected by a bearish market, but News Corp.’s forecast is moving the shares down further.

Article printed from InvestorPlace Media,

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