News Corp sees massive organic growth

Were bottom line results as impressive?

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

While the newspaper printing presses are slowing down, billionaire media mogul Rupert Murdoch isn't having any trouble printing money!

News Corporation (ASX: NWS) this week reported its third quarter results, which saw revenue jump to US$8.4 billion. This was an increase of 14% or US$1.14 billion on the previous corresponding period (pcp). Around half of this increase can be explained by the inclusion of German pay TV company Sky Deutschland and Fox Sports Australia, however the remaining US$627 million of increased revenue reflects organic growth at the Cable Network Programming, Filmed Entertainment and Television divisions.

Unfortunately for shareholders, the result at the bottom line wasn't so impressive. After adjusting for a number of one-offs, earnings per share for the third quarter were US$0.36 compared with US$0.37 in the pcp. It's definitely disappointing to see a decrease in underlying earnings after such a big increase in revenues. However judging by the share price reaction, up nearly 3% on the day, the market must be betting on the profit margin expanding again.

It's obvious that the screened entertainment products, such as cinema, DVD, and particularly cable television, are the engine room of News Corp while the newspapers, magazines and websites struggle. Seven West Media (ASX: SWM), Ten Network (ASX: TEN) and Village Roadshow (ASX: VRL) all offer screened entertainment and content production too. As the chart below shows, the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has far outperformed Seven and Ten in the last 12 months; while News Corp and Village have both outperformed the index.  Free-to-air TV has been caught between a rock and a hard place; as they've struggled to capture value from their customer base.

tmchart

Source: Google Finance

Foolish takeaway

CEO of Seven West Media Don Voelte recently stated "we believe FY 2013 was the worst of it for our company on a net profit after tax basis." If he's right, then there is certainly potential for the free-to-air TV companies to refresh themselves and improve their profitability from this point.

Learn about two more of the ASX's most promising small cap companies in our brand-new free investment report. Click here now, your copy is FREE!

More reading

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Tim McArthur owns shares in News Corp.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »