Analyst Upgrades News Corp. Stock Citing Catalysts, Publishing Upside

7:17 AM PST 1/10/2013 by Georg Szalai

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The value of many of News Corp.'s assets, including its future standalone publishing business, "is still being under-appreciated," Sanford C. Bernstein's Todd Juenger says.

LONDON - News Corp. shares had a strong run in 2012 ahead of a planned separation of the entertainment and publishing businesses of Rupert Murdoch's conglomerate.

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Despite the gains, Sanford C. Bernstein analyst Todd Juenger wasn't bullish on the stock until Thursday, when he upgraded it to "outperform," similar to other analysts' "buy" ratings," citing several catalysts. He also boosted his price target on the stock by $4 to $31.

"The value of many of News Corp.'s assets is still being under-appreciated," Juenger wrote in a report. "A conservative sum-of-the-parts reveals a fair value of $6 per share for [publishing business] New News and $25 per share for [entertainment company] Fox Group." He added that "New News may be especially under-appreciated."

Overall, he has been neutral on News Corp. "due to its hoard of cash, risk to fiscal year 2013 earnings and longer-term risks to its cable networks," Juenger wrote. Explaining how his views have changed, he said: "We are upgrading to 'outperform,' because the cash is being deployed [for recently announced acquisitions], fiscal year 2013 [ending in June] doesn't matter [to investors anymore due to the coming split], and upcoming positive catalysts exist."

Among those positive drivers are "details on the split capitalization (we believe will be favorably received), as well as flipping to new fiscal year 2014 split models, which will look strong against 2013 comparisons and include fruits of merger and acquisitions investments," Juenger said.

About the News Corp. entertainment company, he wrote: "Fox Group is well positioned to benefit from two of the most powerful growth drivers in media: international pay TV and retrans."

Fox's international cable networks group "is nearly equivalent to best-in-class Discovery" Communications as it brings in almost as much revenue per household as Discovery and is concentrated in the highest-growth markets, Juenger said.

Email: Georg.Szalai@thr.com
Twitter: @georgszalai