News Corp. Expected to Report Split Details With Earnings

When Rupert Murdoch’s media empire reports its fiscal fourth quarter earnings after the bell Wednesday, Wall Street will be just as curious to hear details of its plan to split News Corp. in two, as it is to hear the details of the quarter.

News Corporation
Bebeto Matthews
News Corporation

In the wake of the phone hacking scandal at its newspaper division, the company announced that it will split its publishing and entertainment businesses. We’ll see what color Murdoch and COO Chase Carey, add on the cost and long-term implications of the legal battles.

Murdoch has its hands full. There’s the question of how advertising is holding up in light of lower ratings at Fox News. The movie studio faces tough comparisons to the year-ago quarter. And then there are News Corp. digital issues: he just slashed the staff at is digital-only news publication ‘The Daily.’

Wall Street analysts expects News Corp. to report 11 percent lower earnings per share of 32 cents, on three percent lower revenue of $8.722 billion in the fiscal fourth quarter. Studio’s revenues should decline significantly, on tough comparisons to last year’s hits, including “Rio” and “X-Men: First Class.” Lower ratings at Fox should hurt the TV division’s ad revenues. Ongoing weakness in the Italian economy should result in a downturn in subscriber net additions at Sky Italia. And the difficult advertising markets — particularly in Europe, which the company flagged last quarter — should continue to weigh on the publishing units results.

It’s not all bad news: Fox and Time Warner Cable recently reached a carriage deal, (without the public blackout and battle Viacom and DirecTV suffered) and now Fox is headed into a slew of renewal negotiations. We’ll see what Murdoch and COO Chase Carey say about the potential to grow those subscription fees, and how much incremental revenue deals with Hulu (Disney , Comcast) and Netflix are adding.

On the earnings call analysts will be pushing for any details on the plan to split off the publishing and entertainment assets into two public companies. Wunderlich Securities analyst Matthew Harrigan calls “the carve-out of the print businesses … a major perceptual positive,” because “both the cable network business and 20th Century Fox have particularly favorable fiscal 2013 earnings prospects.” He estimates that the print businesses could be worth north of $6 billion.

Though the company has been bolstered by a $10 billion stock buyback plan, with $5 billion in stock repurchases due by next July, the fact that the stock is up more than 30 percent year to date means that the buyback will lose some of its impact. We’ll be watching for details on the pace of share buybacks and guidance for the next fiscal year.

-By CNBC's Julia Boorstin
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