News Corp: Earnings Surge But Scandal Bill Hits $104 Million

News Corp headquarters

News Corp surpassed analyst expectations in quarterly earnings announced today, but the numbers reflected two wildly divergent trends.

On one hand, the company posted impressive growth in its TV, cable and movie businesses. These segments resulted in a $210 million year-over-year quarterly earnings increase and adjusted earnings per share of $0.39 which is better than the $0.34 analysts had predicted.

At the same time, the company announced a 43 percent decline in its publishing business and a quarterly charge of $87 million related to the UK phone hacking settlement.

On an afternoon earnings call, News Corp executives said that about 85 percent of the charge was for lawyers and advisers and the rest for legal settlements. They added that they could not go into details about future settlements but that the “priority is to make this right.” The company says it spent $104 million in 2011 on costs related to the investigation.

The hacking-related charges were not included in the publishing category where the company’s UK and Australia newspapers are experiencing collapsing revenues. The company also said it expected income from its UK newspapers to drop $150 million in the coming year.

Publishing reported second quarter segment operating income of $218 million, a $162 million or 43% decrease compared to the $380 million reported a year ago, reflecting lower advertising revenues at the Australian newspapers and the integrated marketing services business, as well as the absence of contributions from the closure of The News of the World in the U.K.

Analysts, however, appeared less interested in the scandal than in the company’s surging TV and entertainment businesses. The strong performance in these segments was driven in part by the popularity of Fox (NSDQ: NWS) News, FX cable and hit movies like Rio and an Alvin and the Chipmunks.

News Corp also enjoyed strong results from its affiliate BSkyB (NYSE: BSY) which posted improved quarterly income of $174 million compared to $109 million one year ago.

The company also said it expects a reinvigorated performance from Dow Jones as a result of a new CEO, a strong brand and new digital platforms.

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