News Corp rallies after strong Q2 earnings

The after-aftermath.

Shares of Rupert Murdoch's News Corp rallied after the company's management posted solid quarterly results, gave a healthy full-year outlook and promised a more aggressive buy back. Elder Murdoch said he had the backing of his board to continue as chairman and CEO after a critical five weeks for the company in the wake of a phone-hacking scandal at its British newspapers unit that threatened to unravel his control of the company he founded. He also acknowledged publicly for the first time that his son James is not the preferred choice to succeed him as News Corp. CEO, at least in the near-term. Instead, Murdoch has endorsed COO Chase Carey as a future CEO in the event that he steps down, a move that is likely more favored by the investment community.

News Corp's board has been criticized in recent weeks for being crammed with family members, corporate insiders and long-time associates of Murdoch. It is often held up as prime example of weak corporate governance by experts, especially since the phone hacking scandal rocked the company. Murdoch's comments came during a quarterly earnings call in which he was more lucid about the company's operations than he was last month. News Corp, which owns Fox TV and cable networks, and newspapers including the Wall Street Journal and The Sun in Britain, reported a net income of $683 million, or $0.26 a share, down from $875 million or $0.33 a share, a year ago, after recording a $254-million loss on the disposition of its troubled social networking Myspace. The company said it expects its full-year operating income to increase in fiscal year 2012 by "low to mid teens" percentage points.

Murdoch and Carey promised an accelerated share buy-back of the stock, which has dropped in value by nearly a fifth since the scandal erupted on July 4. The executives said it was possible that the $5-billion buyback, which was announced on July 12, could be expanded if they believe the stock continued to be undervalued. Meanwhile, Carey said the company plans to use its enlarged balance sheet for disciplined
investments, both internally and externally. News Corp. now has $12.7 billion in cash and cash equivalents after dropping its bid to buy the rest of pay-TV operator BskyB (BSY).

News Corp. (NWSA : NASDAQ : US$16.19), Net Change: 2.48, % Change: 18.09%, Volume: 87,037,915

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

Comments
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome