NEW YORK (Reuters) - News Corp and Time Warner Inc reported higher-than-expected quarterly profit as movie studios and cable network gains helped offset declines at their newspaper and magazine units.
Both News Corp and Time Warner, which have been cutting costs to keep ahead of falling revenue, raised their forecasts, and News Corp Chief Executive Rupert Murdoch said he expected 2010 to be a year of stability.
The results on Wednesday suggested that big media companies were recovering from the sharp decline in advertising revenue during the financial crisis, even though performance is still worsening at their newspaper and magazine publishing units.
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News Corp raised its fiscal year operating income forecast, saying profit would grow in the high single to low double-digit percentage range. It previously said profit would grow in the high single digits. Time Warner raised its 2009 profit outlook to $2.05 a share.
“The steps we took to increase market share ... are starting to pay off as are our restructuring efforts,” Murdoch said on a conference call with analysts. “As I look ahead, I am seeing some encouraging trends in most of our business.”
News Corp shares rose 3.4 percent in after-hours trading while Time Warner’s were flat.
News Corp scored a big hit with the international release of the film, “Ice Age: Dawn of the Dinosaurs.” RBC analyst David Bank said the movie was one of the most successful international box office hits ever.
Lucrative cable networks helped News Corp and Time Warner surpass Wall Street forecasts.
Earlier this week, Discovery Communications and Viacom Inc reported that advertising sales and distribution at their cable networks had performed well.
News Corp’s first-quarter net income was $571 million, or 22 cents a share, compared with $515 million, or 20 cents a share last year. Analysts, on average, had expected earnings of 18 cents a share, according to Thomson Reuters I/B/E/S.
Revenue fell 4.1 percent to $7.20 billion, beating the average estimate of $7.16 billion. Operating income rose 9.3 percent to $1.04 billion.
“Both the top line and bottom line were ahead of what we were looking for,” said RBC analyst David Bank. “As the macro (economy) winds its way back to health, the ability to operate with expense discipline is a huge positive.”
Time Warner’s third-quarter net income fell to $661 million, or 55 cents a share, from $1.07 billion, or 89 cents a share, a year before. Adjusted profit was 61 cents a share, compared with the 53 cents analysts had expected, according to Thomson Reuters I/B/E/S.
Time Warner and News Corp are grappling with problems in publishing. News Corp’s newspaper unit posted an 81 percent decline in operating income as ad sales fell and people gave up their print editions and went online.
Time Warner is cutting hundreds of jobs at its Time Inc magazine unit and expects to take a $100 million charge this quarter in restructuring costs.
The improvement in big media conglomerates’ results has accompanied a renewed interest in doing deals.
The biggest of those is Comcast Corp’s proposal to take control of TV and movie studio company NBC-Universal from General Electric Co and Vivendi.
News Corp is not interested in NBC, Murdoch said on the conference call with analysts. Earlier this fall, Murdoch said the company was exploring opportunities regarding that deal.
News Corp executives declined to comment on the company’s efforts to take over the Travel Channel from Cox Enterprises. It has been in competition for the channel with cable network owner Scripps Networks Interactive.
Murdoch said that News Corp also plans to keep control of Dow Jones Indexes, after reports that it was considering selling it.
He said little about MySpace, News Corp’s online social network.
News Corp started turning MySpace into a music-oriented site after its rivals Facebook and Twitter eclipsed its popularity.
Murdoch said News Corp does not expect to get $900 million that it had anticipated from a three-year search advertising deal between MySpace and Google Inc because the network did not meet traffic guarantees that it had promised Google.
Reporting by Robert MacMillan. Additional reporting by Paul Thomasch; editing by Tiffany Wu, Andre Grenon, Toni Reinhold