News Corp's Earnings: The Impact Of MySpace (NWS)

After reporting strong earnings, News Corp (NWS) traded up 2.51% after hours to $19.60 (versus a $19.12 close). Going into earnings today, options traders looked like they had factored in a move of up to $0.60 in either direction, which was about 3% at current levels. Analysts were still mixed, but the current trend and feel was more positive after it was all said and done.

Keep in mind that NWS has only officially been labeled a US-based company for a fairly small time compared to most S&P 500 Index components, so it is not officially as widely followed as some other big media companies. Please look at the chart following this article to see the importance of the after-hours activity in the stock.

News Corp reported earnings of $820M, operating income of $1.0 Billion, net revenues of $6.19+ Billion, and it applied an EPS number of $0.26 on a diluted combined basis. The company also hiked its current share buyback plan from $3 Billion to $6 Billion to be completed in the coming 2-years "as the market undervalues the company" according to Murdoch on the conference call (see full transcript). It had already made $2.5 Billion in share buybacks of the current $3 Billion buyback plan. The company also said it was comfortable with its guidance for the year that was offered in February.

It is probably not surprising that print operating income fell 9%, but we finally got to interpolate some company-released figures on Myspace.com. The company said it has over 70 Million registered users, and in the conference call said it was nearing 80 Million users. Of the $6.19+ Billion in revenues for the quarter, it said "other" operations (which would include New Media Initiatives) were $359M in revenues and a loss in "other" operations of $49M.

Outside of its films, broadcast, cable, satellite, and print revenues, the real interest here to us was Myspace.com. It is newer than any of its other key investments and operating units that contribute to revenues because of the possibility of it affecting other new media companies. Rupert Murdoch had been highly criticized over his purchase of Myspace.com through its Intermix acquisition for some $580 Million, but the last laughs so far have probably been by Murdoch himself. Myspace.com is now one of the top 5 web destinations (second in page views according to many), and exact figures vary from various polls, ad agencies, and traffic measurements seen. For now it is probably best to keep exact figures vague because of conflicting data and constantly changing figures.

If you look at the charts below from Bigcharts.com, you will see how critical this current after-hours price is. On a dividend adjusted basis, the stock is right at the upper-end of what has been a $15+ to $19+ extreme trading band for the last two to three years and is within striking distance of dividend adjusted five-year highs: