Analysts Laud Unchanged News Corp. Growth Outlook Despite Weak Fox Ratings

News Corp generic image - H 2012
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News Corp generic image - H 2012

"Despite the fact that the fundamental growth story appears to have sprung a few leaks, we still view shares as attractive," says one Wall Street observer.


The stock of Rupert Murdoch's News Corp. rose slightly on Wednesday as most analysts called its latest quarterly earnings uneventful, but some felt encouraged that the conglomerate reiterated its financial outlook despite recent ratings weakness at Fox.

Cowen & Co. analyst Doug Creutz was among those who were content to hear that News Corp. maintained its growth forecast for its full fiscal year after reporting its results late Tuesday. "Despite the fact that the fundamental growth story appears to have sprung a few leaks (Sky Italia weakness, ratings issues at Fox), we still view shares as attractive," he said in reiterating his "outperform" rating on the stock on Wednesday.

A couple of Wall Street observers also slightly raised their stock price targets following the earnings.

News Corp.'s stock was up 1.6 percent at $24.66 as of 10am ET. Last month, it hit a 52-week high of $25.50, but it has traded as low as $15.93 over the past year.

Evercore Partners analyst Alan Gould reiterated his "overweight" rating on the stock and pushed up his price target by $1 to $27 "based on the superior fundamental earnings growth and the recent shareholder-friendly moves."

He also argued that the so-called "Murdoch discount" that investors have often put on the stock due to the founder's control of the conglomerate is shrinking. "The close to $10 billion [stock] buyback, publishing spin-off and rationalization of non-consolidated assets has reduced the discount," he said.

Sanford C. Bernstein's Todd Juenger similarly raised his target price by $2 to $27 while maintaining his "market-perform" rating on News Corp.'s stock.

"We remain fixated on the $12 billion of cash on the balance sheet, the elephant in the room," he said. "How (and if) News Corp. deploys that cash is the most crucial swing factor in the share value going forward." He added: "Optimistic investors can buy now, taking a leap of faith that they will be happy with the capitalization of the [company] split and the cash deployment afterwards."

Nomura analyst Michael Nathanson in a report said News Corp.'s latest earnings marked a "solid start to the year" and highlighted that the reiterated guidance was key amid recent ratings trends. "Importantly, management also indicated fiscal year 2013 guidance incorporates a “realistic view” for the underperformance of [the] Fox broadcast network," he wrote.

He reiterated his "buy" rating and $28 price target on the stock, which would mean 15 percent upside. "With the timing of the spin still on track, we believe investors will be rewarded with the high-growth assets at “Good News” combined with an interesting option at the new publishing company," Nathanson said.