News Corp (NWS) Sinks On Weak Results and Guidance

November 6, 2008 12:09 PM EST

Shares of News Corporation (NYSE: NWS) (NYSE: NWS.a) are down 16% today after reporting disappointing first quarter results and guidance.

After the close, News Corp reported Q1 EPS of $0.20, below the consensus of $0.22. Revenues climbed to $7.51 billion versus the $7.07 billion reported last year, but was below the consensus of $7.57 billion.

The company said it now expects fiscal 2009 operating income to drop by a percentage in the low to middle teens, versus prior guidance of 4%-6% growth.

Fox News Channel was a bright spot, growing operating income 27%. Operating income for the entire Cable Network Programming group rose 31%. Fox Interactive Media grows revenues 17% on strength of advertising and search revenue growth at MySpace. Television operating income declines due to lower advertising revenues at the Television Stations and the sale of eight television stations.

Chief Executive Officer Rupert Murdoch said, "I'm pleased that our cable group continues to perform extremely well, SKY Italia remains a top performer and Fox Interactive Media is seeing revenue growth even in the face of negative macroeconomic conditions around the globe, including weak advertising markets. All media companies are being tested and the year ahead will be difficult. I am confident that our long-term strategy of cultivating diversified assets at different stages of development, judicious investment of our capital and a strong balance sheet will guide us through these difficult times."

Adding insult to injury, JP Morgan downgrades News Corp from Overweight to Neutral. The firm does not expect News Corp to outperform its peers due to its asset mix, which makes it more vulnerable to macroeconomic pressures.

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