News Corp. and its Fox Entertainment last week offered a far-better-than-expected quarterly performance and an improved financial outlook for the remainder of their fiscal year, while conceding that the health of the companies’ TV-related operations largely hinge on an advertising recovery.
The companies said losses at Fox Television Network widened in the fiscal third quarter to $45 million from $5 million a year earlier, although the network’s television stations posted a 42 percent cash-flow gain to $173 million, bolstered by the Super Bowl telecast and the addition of the Chris-Craft stations.
Fox raised its fiscal 2002 earnings outlook to an increase of between 13 percent and 15 percent from earlier projections of upper-single-digit percentage increases. News Corp. also increased its forecast for fiscal 2002 earnings, saying they will rise 8 percent to 10 percent.
Overall, Fox reported that fiscal third-quarter earnings rose 80 percent to $391 million on a 28 percent rise in revenues to $2.5 billion. Analysts generally expected $280 million in earnings on $2.2 billion in revenue. For the same period, News Corp. reported a 54 percent rise in operating income to $549 million on a 17.6 percent rise in revenues. News Corp. American depositary receipts closed May 14 up more than two points to $28.40 a share.
“[The] advertising market is showing the first clear signs of return to health,” News Corp. Chairman Rupert Murdoch said. But he added, “I’m not yet prepared to declare a permanent end to the ad recession.” He said News Corp.’s record cash flow last quarter is the result of core businesses finally delivering on recent growth investments.
However, the one-time $4.2 billion write-down of its stake in Gemstar-TV Guide International is a situation being addressed by News Corp.’s more active involvement in the management through its recent appointment of former Fox cable executive Jeff Shell as Gemstar president. Mr. Murdoch said he expects no other major write-offs, having taken a $1 billion sports programming write-down in the last quarterly report.
“The best sign of progress at the stations group has been market share gains, which is 21 percent,” said Peter Chernin, News Corp. president and chief operating officer. “I think we are recognizing the benefits of duopoly economics a year after the Chris-Craft acquisition; we’re seeing strong programming across most dayparts on the stations.” TV station advertising pacings were up 6 percent last quarter, the first rise in six quarters.
But he added, “We’ve certainly had a very disappointing year in the broadcast network. We’ve seen that coming for a while, and we’ve been determined to restore its momentum.”#