Huntleys' Stock of the Week

Recommendations: Buy

NWS's current stock prices

Investment Rating

NWS is a globally integrated and diversified media company. Creation of in-depth regional and national content is distributed through different media channels. Consolidated EBIT is derived from Film 22%, Television 21%, Cable Programming 17%, Magazines 6%, Newspapers 10% and Book Publishing 3%. Associate entities add 18% of EBIT with BSkyB adding 7% and Direct TV 7%. Revenue growth from Pay TV assets offsets declines from traditional Newspaper and Book Publishing sales. NWS aims to be at the forefront of offering as much content to as many customers in as many different media formats. NWS has been re-incorporated in the US, one Australian CHESS Depositary Interest (CDI) equals one US share. Shares are divided into Class A non-voting (NWSLV) and Class B voting (NWS).

Event

* Reported revenue increased 16%, to $8.8 billion.

* News Corp's reported operating profit grew in line with revenue, at 16%. However, we estimate internal growth was closer to 10%, similar to the company's internal revenue growth.

Impact

* We are maintaining our fair value estimate after reviewing News Corporation's NWS fiscal third-quarter results, released Wednesday.

* The largest contributor to internal revenue growth this quarter was the cable networks, which grew 27%, fueled by strong ratings on the Fox News Channel because of coverage of the presidential primaries.

* The only disappointment during the quarter was performance at Fox Interactive Media (primarily MySpace).

* The short-term growth prospects for some of News Corp's largest properties (network television and cable television) are a bit uncertain, given a slowing U.S. economy. However, we believe News Corp has better product and geographic diversification than its media conglomerate peers. This diversification provides stability and consistent profits, allowing the company to take risks and enter new markets.

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