Rupert Murdoch's News Corp. Sees Stock Jump in Thursday Trading
UPDATED: The shares gained 18.1 percent amid a broader market rebound as analysts lauded the fiscal-year growth outlook provided by management Wednesday afternoon and signals of potential further stock buybacks.
NEW YORK - Shares of Rupert Murdoch's News Corp. jumped 18.1 percent on Thursday as analysts said they were content with the conglomerate outlook for its latest fiscal year and promise of potential additional rewards for shareholders.
Amid a broad market rebound that boosted the S&P 500 stock index by 4.6 percent, News Corp.'s stock closed at $16.19, pushing it back above its 2010 close of $14.56. But it is still below its 52-week high of $18.35, set in early June before the phone hacking scandal erupted again.
News Corp. president, COO and deputy chairman Chase Carey and CFO David DeVoe said on the firm's quarterly earnings conference call Wednesday afternoon that after a current $5 billion stock buyback program ends in a year more buybacks are possible. Chairman and CEO Murdoch said while he didn't like the idea of buybacks in the past, that was before the stock's recent decline amid phone hacking scandal and more recently market turmoil. The conglomerate also raised its dividend by 27 percent and forecast operating profit growth for its new fiscal year in the low to mid teen percentage range.
Evercore Partners analyst Alan Gould summarized the earnings report and call this way: "Good quarter and outlook; larger buyback likely."
Wunderlich Securities analyst Matthew Harrigan in a report spoke of "a new growth Avatar" as he raised his stock price target on News Corp. by $2 to $20, citing what he predicted would be an "aggressive implementation of of [the] $5 billion share program" and "best of class" quarterly results.
"Healthy guidance, aggressive buyback should reignite interest" in News Corp.'s stock, Davenport & Co. analyst Michael Morris said in a similarly themed report on Thursday.
"Suggested aggressive buybacks could continue for two to three years," echoed Cowen analyst Doug Creutz.
And Thomas Eagan of Collins Stuart said that if the company added $3 billion to its $5 billion stock repurchase authorization, his earnings per share estimate would increase from $1.40 to $1.48.
Lazard Capital Markets analyst Barton Crockett said that if News Corp. makes good on using more money for stock buybacks, it will provide the "best cash return in media." He added: "News Corp. made the best answer we can imagine" amid concerns due to the recently reignited phone hacking scandal. If it indeed uses the bulk of its cash of around $12 billion plus free cash flow of $3 billion-$4 billion annually on buying back stock, "that’s nearly 50 percent equity shrinkage at current prices, a total reversal of the bear retort that News is less open to share repurchases than peers," Crockett said.