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News Corp: Will It Meet Its Own "Great" Expectations?

News Corporation
Bebeto Matthews
News Corporation

News Corp raised its guidance earlier this year, so now the big question facing the company is whether, in the face of an economic slowdown, it'll be able to live up to those higher expectations.

When News Corp reports quarterly earnings after the bell today Wall Street's looking for earnings of 31 cents per share on $8.65 billion dollars of revenue, according to Thomson. The company says it expects operating profit to increase by a mid-teen percentage margin (excluding Dow Jones and the sale of a UK property) which is incredibly strong considering how battered down the media stocks have been over the past 12 months.

One sure area of strength is the company's TV business. Fox is sure to be strong-- it definitely weathered the writers strike better than any of the other networks in terms of ratings. Super Bowl ratings were at a record high and Idol scored throughout the quarter. Cable network revenue is also expected to grow, on stronger ad sales and higher fees paid by cable and satellite operators.

On the flip side, Twentieth Century Fox film and TV studios are expected to post a drop from last year, thanks largely to really tough comparisons to last year, when the DVD business benefited from the release of huge hits like "Devil Wears Prada" and "Borat." Another weak point: the company owns a 39 percent stake in BSkyB, which posted losses. And while MySpace is expanding internationally, costs for the Fox Interactive division are expected to keep pace with revenues.

On the post-earnings conference call I'm expecting lots of questions about what CEO Rupert Murdoch plans to do with its Fox Interactive division, the star of which is MySpace. There's some concern going into earnings that MySpace will disappoint expectations.

And investors are certainly wondering if the social network could link up with Yahoo--a strategy Murdoch had considered before--now that Microsoft has withdrawn its bid for Yahoo. Also, Murdoch has offered to buy Newsday for $580 million dollars. We'll see if Murdoch has anything to say about his offer and the challenging bid from Mortimer Zuckerman, owner of the New York Daily News.