In the battle between scandal and earnings, earnings have won so far, as shares in News Corp. (NASDAQ: NWS) have moved toward their 52-week high. The stock traded at $17.47 yesterday, against a 52-week high/low of $19.08 and $13.83. Shares have risen 23% from the levels they fell to when the scandal unfolded about reporting abuses at the firm’s News of the World paper.
While it is impossible to pinpoint the reasons for the turnaround in the shares, at least two causes are clear. The first is that the media conglomerate posted strong earnings in the most recently reported quarter. The other is that the investigation prompted by the scandal has not claimed the jobs of any more senior News Corp. executives. And there is no hard evidence that the hacking of phones and personal records were part of the regular practice at Murdoch’s other UK papers or at any of his U.S. properties.
In the quarter that ended on June 30, News Corp. revenue rose to $8.96 billion from $8.11 billion in the same quarter a year ago. Operating income rose from $904 million to $1.35 billion. The huge cable and TV operations that have been the engine of News Corp.’s growth continue to post impressive results. Operating income at the company’s cable TV division rose to $631 million from $563 in the June quarter a year ago. The scandal may have touched News Corp.’s print operations, but it has not bothered the division that provides the company most of its success.
Another, less often mentioned factor in the steady rise of News Corp.’s stock is the near certainty that Murdoch is no longer critical to the firm’s success. Wall St. perceives that chief operating officer Chase Carey can run the company without Rupert or his son James. Both could disappear tomorrow and News Corp.’s earnings would be unaffected.
Douglas A. McIntyre
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