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Stock Analyst Update

Weakness at Fox Dogs News Corporation

Until ratings pick up, investors may want to avoid both stocks.

Mentioned: ,

What Happened?
News Corporation (NWS) reported Wednesday that fiscal first-quarter profits met expectations of $0.14 per share, down from $0.16 in the prior-year period as operating income declined by $5 million to $390 million. The earnings decline was due to poor performance at majority-owned Fox Entertainment's (FOX) television business, where operating income declined by $69 million to $80 million. Despite this, ratings at Fox did improve by 13% in the all-important 18- to 49 year-old demographic that advertisers desire. In News Corporation's movie business, operating income grew by $55 million to $101 million on the strength of the movie X-Men, and in its HarperCollins book-publishing unit, operating income increased 56% to $50 million.

What It Means for Investors
Although there were some bright spots in News Corporation's results, we continue to believe that ratings at Fox need to show sustained improvement to make the stocks of either Fox Entertainment or News Corporation attractive. ABC's Who Wants to be a Millionaire and CBS' Survivor are still the ratings leaders; until Fox delivers a blockbuster show or strong lineup of shows, ratings and advertising dollars are likely to continue to lag those of its competitors.

Richard Wilson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.