News Corp (NWS), Past Drawbacks and Glowing Future

Submitted by Jim Thesiger on 1 May, 2008 - 21:56

The discussion is about the effect of current media environment which has caused current businesses to review their operations for inefficiencies and strengths.

News Corp Takes Hit but Future is Glowing

In the current media environment that is rife with rumours of consolidation and acquisitions, investors are acutely aware of any activity. This atmosphere also causes current businesses to review their operations for inefficiencies and strengths. News Corp (NWS), the international media giant is the perfect example of such a company. Over the last year it has not performed to analyst expectations and hence was having the above questions drawn to it. That was until yesterday’s divisional third quarter results.

BSkyB, the company’s pay television division, reported its third quarter result yesterday, with the stock lifting 2.3% in early trade. Although the adjusted pre-tax profit was down 6% for the nine months, including charges for the broadband roll-out, it was better than many pundits had predicted and hence lifted hope on the parent companies upcoming report.

Although overall profit was down 4%, this will have little impact on the overall NWS stock price. The key impetus for this result was the window it provides for NWS third quarter results next Thursday. Based on the overall environment along with activities NWS has in its pipeline, Macquarie Research Equities (MRE) continues to maintain its outperform rating on the stock. This rating comes with a 75% premium to the current stock value. Essentially this price is pending a strengthening US dollar and NWS continuing to play its dominating role in the ongoing industry consolidation.

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