News Corporation NWSA - Buy With Target 20$

NWSA - Company Description.
News Corporation is a diversified global media company with operations in eight industry segments: filmed entertainment; television; cable network programming; direct broadcast satellite television; integrated marketing services; newspapers and information services; book publishing; and other. The activities of News Corporation are conducted principally in the United States, Continental Europe, the United Kingdom, Australia, Asia and Latin
America.
EPS Change - NWSA will release FY1Q11 results on Wednesday, November 3, 2010, and will hold a management conference call at 4:30pm ET to discuss results. The call in number is (800) 230-1059, Passcode: NEWS.

FY1Q11. We are raising our revenue estimate by 0.3% to $7.158B, (down 1% y/y) and we are fine tuning the revenue mix. We now have higher expectations in Television, (up 5% y/y and 11% higher than our previous estimates), and Cable Network Programming, (up 14% y/y and 3% higher than our previous estimates), reflecting strength in the advertising market and better than estimated affiliate fee growth.

These two upward revisions are partially offset by lower revenue expectations in the Other segment, (down 25% y/y and 17% lower than previous estimates), and DBS Television, (down 9% y/y and 6% below our previous estimates). Our revised outlook for Other reflects our expectation for declining search revenue and declining ad revenues at MySpace.

We are lowering our EBIT outlook for the DBS Television segment owing to higher marketing expenses and SAC as a result of changes in consumer offerings during the quarter. These changes result in 1% lower segment EBIT estimates to $1.1B.

Below the line, we have lowered our estimate for interest expense to be more in line with 4Q10 results. As a result of these changes, we are lowering our Net Income by 2% to $602M, and our EPS estimate by 2% to $0.23.

FY11. We are revising our estimates to reflect the changes discussed above, and as a result we are lowering our FY2011 revenue estimate by 0.4% to $32.615B and EPS by 3.5% to $1.09.

We maintain our BUY rating and $20 target price for NWSA.

FY1Q11 ESTIMATED RESULTS
NWSA is expected to report FY1Q11 revenue of $7.158B (a 1% y/y decline and higher than our previous estimate of $7.136B), segment Operating Income of $1.109B, up 6% y/y and 1% below our prior estimates, and adjusted Operating EPS of $0.23, up 6% y/y and 2% below our prior estimate of $0.24.

FY2011 ESTIMATE REVISION
We are revising downward our FY2011 revenue estimate, down 0.4% to $32.615B, and
EPS, down 3.5% to $1.093, to reflect the changes discussed earlier in this report..

Target Price
Our 12-month target price of $20 is based on a DCF model. We use a WACC of 10.1% and a long-term nominal GDP growth rate of 2%. The standard DCF is widely used on Wall Street because it is a rigorous bottom-up valuation of the enterprise based on discounting its long-term cash flows and removing the impact of non-cash accounting conventions. Positives and negatives of this valuation methodology are highlighted beside the calculation in Table 5.
Our $20 target price embeds a 10-year OIBDA growth rate of approximately 4.8% annually beginning in FY 2011 and represents an 8.5x multiple of forward year (2011E) OIBDA