Miller Tabak media analyst David Joyce maintained his “buy” rating on News Corp., but reduced his full-year fiscal 2008 operating income estimates for the media giant to compensate for what he believes will be increased future investments in cable networks and international television stations.
Joyce wrote in a report that he continues to like News Corp., despite its stock’s underwhelming performance. News Corp. shares are down 1.6% (36 cents) so far this year, due mainly to what the analyst believes were overhanging transactions (Dow Jones, Liberty Media) that have diverted investors’ attention. And though Joyce reduced his fiscal 2008 operating income growth estimate from 19% to 18% (ahead of News Corp.’s guidance of mid-teens percentage growth), he still thinks the company can meet his fiscal 2008 projections of 22% earnings growth and 7% free cash flow growth.
That type of performance, he wrote, tells “a story of a proactive media conglomerate that constantly re-energizes its portfolio to be a leader in new media entertainment and distribution trends.”
The new operating income growth estimate translates into a $100 million reduction, mainly due to what Joyce believes will be more moderate box office growth for its filmed entertainment unit, higher costs at TV stations as it launches channels in Turkey, Poland, Serbia and Indonesia and slow growth at its newspaper and publishing businesses.
Offsetting those reductions is an anticipated $19 million increase in cable network operating income, bolstered by the expected launch of the Fox Business Network in October.