News Corp. (NWSA) Down 10% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for News Corp. (NWSA). Shares have lost about 10% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is News Corp. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

News Corporation’s Q4 Revenues & Earnings Beat

News Corporation reported fourth-quarter fiscal 2022 results, wherein the top and the bottom line beat the Zacks Consensus Estimate and improved from the year-ago period’s respective figures. NWSA witnessed strength, primarily across Digital Real Estate Services, Dow Jones, News Media and Book Publishing segments.

In fiscal 2022, Foxtel Group's streaming subscription revenues accounted for roughly 20% of the total circulation and subscription revenues.

Quarterly Details

News Corporation delivered adjusted quarterly earnings of 37 cents a share. The bottom-line figure exceeded the Zacks Consensus Estimate of 11 cents and improved from adjusted earnings of 16 cents reported in the year-ago period.

Total revenues of $2,674 million surpassed the Zacks Consensus Estimate of $2,591 million and grew 7% from the prior-year quarter’s levels. This benefited from strength in the entire revenue lines, including the recent acquisitions, particularly OPIS and Base Chemicals (rebranded as Chemical Market Analytics, CMA), and a $110-million gain from the additional week. Foreign currency fluctuations had a 6% negative impact on revenues. Adjusted revenues rose 9%.

Total segment EBITDA climbed 50% year over year to $315 million, thanks to higher revenues and reduced expenses in the Other segment resulting from lower employee costs, led by stock price performance and a decline in non-recurring legal settlement costs. This was somewhat offset by higher costs at the Dow Jones, Digital Real Estate Services and Book Publishing segments.

Foreign currency fluctuations had a $20-million negative impact on total segment EBITDA. Adjusted total segment EBITDA advanced 34%.

Segment Details

Revenues at the Digital Real Estate Services segment increased 7% year over year to $443 million, driven by a strong performance at Move and REA Group, including the acquisition of Mortgage Choice and a $14-million gain from the extra week in the fiscal fourth quarter.

This was partly offset by a 5% negative impact from foreign currency fluctuations. Adjusted segment revenues increased 7%.

Revenues in Move rose 4% to $193 million owing to increased real-estate revenues. Real Estate revenues, which contributed 84% to total Move revenues, improved 3% from the extra week in the reported quarter.

The referral model generated 31% of the overall Move revenues. Move’s internal data shows that average monthly unique users of realtor.com’s web and mobile sites fell 13% year over year to 93 million.

Revenues at the REA Group jumped 10% to $250 million, buoyed by increased financial services and higher Australian residential depth revenues.

The Subscription Video Services segment’s revenues were $524 million, down 3% year over year. Increased revenues from Kayo and BINGE, as well as higher advertising revenues, were more than offset by lower revenues from the residential broadcast product.

Foreign currency fluctuations adversely impacted the segment’s revenues by 7%. Adjusted segment’s revenues rose 4% year over year.

Foxtel’s total closing paid subscribers were 4.4 million as of Jun 30, 2022, reflecting an increase of 13% year over year. The upside can be attributed to an increase in BINGE and Kayo subscribers, partly offset by lower residential broadcast subscribers.

Broadcast subscriber churn improved to 13.8% from 17.1% in the prior year. Broadcast ARPU grew 2% year over year to A$83 (US$59).

Revenues at the Dow Jones segment rose 26% year over year to $565 million on account of increased advertising revenues, growth in circulation and subscription revenues, a $40-million gain from the additional week and contributions from the buyouts of Investor’s Business Daily (“IBD”), OPIS and CMA. The segment’s digital revenues contributed 76% to total revenues. Adjusted segment revenues grew 16%.

Circulation and subscription revenues improved 29% during the quarter under discussion. Circulation revenues rose 17%, driven by gains from the extra week, consistent strength in the digital-only subscriptions for Dow Jones’ consumer products and the acquisition of IBD.

Professional information business revenues jumped 47%, mainly driven by the OPIS and CMA acquisition and a $14-million gain from the extra week. Digital circulation revenues represented 68% of circulation revenues.

Advertising revenues increased 13%, primarily owing to a 16% rise in digital advertising revenues and 9% growth in print advertising revenues. Digital advertising accounted for nearly 58% of the total advertising revenues in the reported quarter.

During the quarter, the overall average subscriptions to Dow Jones’ consumer products reached 4.9 million, up 9% from the prior-year quarter’s level. Digital-only subscriptions to Dow Jones’ consumer products rose 14%. Subscriptions to The Wall Street Journal jumped 8% to more than 3.7 million average subscriptions. Digital-only subscriptions to The Wall Street Journal increased 14% to 3.1 million average subscriptions and accounted for 83% of the total Wall Street Journal subscriptions.

The Book Publishing segment reported revenues of $513 million, up 4% year over year, including a $20-million gain from the extra week. Growth in revenues was also driven by a $14- million contribution from the buyout of Houghton Mifflin Harcourt’s Books and Media segment (“HMH”). Revenues were also driven by increased frontlist sales in General books, including Finding Me by Viola Davis and The Mothers and Daughters of the Bible Speak by Shannon Bream, partly offset by reduced sales of the series of Bridgerton titles by Julia Quinn and lower sales of foreign language and Christian books as well as the negative impact of foreign currency fluctuations.

Digital sales increased 9% year over year due to higher downloadable audiobook sales and made up 24% of Consumer revenues. Adjusted segment revenues rose 4%.

Revenues in the News Media segment jumped 6% year over year to $629 million in the reported quarter. The segment’s revenues gained from increased advertising, and circulation and subscription revenues, and gains from the extra week.

This was offset by the adverse impact of foreign currency fluctuations. Within the segment, revenues at News Corp Australia rose 6% and the metric at News UK was flat. Adjusted revenues for the segment climbed 14%.

Circulation and subscription revenues improved 3%, backed by a $19-million benefit from the extra week in the quarter and increased content licensing revenues, more than offset by a 9% adverse impact from foreign currency fluctuations.

Advertising revenues climbed 8% on improvement in digital advertising across businesses and gains from the extra week, partly offset by negative foreign currency fluctuations.

Digital revenues contributed 35% to the News Media segment revenues compared with 32% in the year-ago quarter. The same accounted for 33% of the combined revenues of the newspaper mastheads. As of Jun 30, 2022, The Times and Sunday Times closing digital subscribers were 445,000.

The same at the News Corp Australia was 964,000. The Sun’s digital offering reached nearly 165 million global monthly unique users in June 2022, while New York Post’s digital network attained about 198 million monthly unique users in the same month.

Other Financial Aspects

News Corporation ended the quarter with cash and cash equivalents of $1,822 million, borrowings of $2,776 million and stockholders’ equity of $8,222 million, excluding non-controlling interest of $921 million.

Net cash provided by operating activities amounted to $1,354 million during fiscal 2022. NWSA incurred capital expenditures of $499 million in the said period. Free cash flow available to News Corporation was $663 million. Robust cash generation funded the execution of the $1-billion share repurchase program.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

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