We recently downgraded our recommendation on News Corp. (NWSA) to Neutral from Outperform with a target price of $14.
The diversified media conglomerate indicated that its fourth-quarter 2010 operating income would be impacted by weak results from Filmed Entertainment segment on account of the timing of the release of films. News Corp. also hinted at weak results in Fox Broadcasting Company due to higher programming costs and lower network revenue.
The news of strain on operating income in the fourth quarter came as a big surprise, and negatively impacted investor confidence, as apparent from the current Zacks Consensus Estimate.
The current Zacks Consensus Estimate for fourth-quarter 2010 is 20 cents a share, which has dropped 5 cents in the last 30 days with 13 out of 16 analysts covering the stock, chopping their estimates on account of a disappointing fourth-quarter outlook.
News Corp. posted better-than-expected third-quarter 2010 results on the heels of the blockbuster film Avatar, growth across its major segments, improved advertising environment and significant cost-cutting initiatives. The improvement in advertising trends was witnessed across telecom, automobile, real estate and retail sectors.
Consequently, News Corp. raised its fiscal year 2010 outlook, and now expects operating income to increase in the high 20% range from the low 20% range previously forecasted. This positively impacted the Zacks Consensus Estimate.
For fiscal 2010, the current Zacks Consensus Estimate is 96 cents a share, which rose 2 cents in the last 30 days, with 11 analysts raising their estimates and only two analysts lowering the estimates.
News Corp.’s shares are maintaining a Zacks Rank #3, which translates into a short-term ‘Hold’ recommendation. Our long-term recommendation for the stock also remains “Neutral”.
Read the full analyst report on “NWSA”
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