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News Corporation (NWSA) Q3 Earnings Beat, Revenues Fall Y/Y

News Corporation NWSA reported third-quarter fiscal 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate but declined year over year. NWSA witnessed a decline in revenues across all its segments except Book Publishing and Dow Jones.

Shares of this diversified media and information services company have lost 6.2% in the past one year against the industry’s gain of 1.5%.

News Corporation Price, Consensus and EPS Surprise

News Corporation Price, Consensus and EPS Surprise
News Corporation Price, Consensus and EPS Surprise

News Corporation price-consensus-eps-surprise-chart | News Corporation Quote

Quarterly Details

News Corporation delivered adjusted quarterly earnings of 9 cents a share. The bottom-line figure beat the Zacks Consensus Estimate of 6 cents but plunged 43.7% from adjusted earnings of 16 cents reported in the last fiscal year’s comparable period.

Total revenues of $2,447 million beat the Zacks Consensus Estimate of $2,398 million but dipped 2% from the prior-year fiscal quarter’s levels. The decline was primarily due to a $98 million or 4% negative impact from foreign currency fluctuations and lower revenues at the Digital Real Estate Services segment due to continued challenging housing market conditions in the United States and Australia. The downside was partially offset by higher Dow Jones segment revenues, which includes the acquisitions of OPIS and Chemical Market Analytics and higher revenues at the News Media and Subscription Video Services segments on a constant currency basis. Adjusted Revenues were flat year over year.

Total EBITDA decreased 11% to $320 million, primarily due to lower revenues, higher costs at the Dow Jones segment and a negative impact from foreign currency fluctuations. The results also include $7 million of costs related to the professional fees incurred by the Special Committee and the company in connection with evaluating the proposal from the Murdoch Family Trust as well as the fees related to the potential sale of Move. Adjusted total segment EBITDA decreased 15%.

Segment Details

Revenues at the Digital Real Estate Services segment declined 13% to $363 million, induced by a 4% negative impact from foreign currency fluctuations. Adjusted segment revenues decreased 10%.

Revenues in Move fell 17% to $141 million primarily as a result of lower real estate revenues. Real estate revenues, which represented 79% of total Move revenues, decreased 23% to $33 million. The decline was due to the continued impact of the macroeconomic environment on the housing market, including higher household interest rates, which has led to lower lead and transaction volumes. The referral model generated 23% of total Move revenues in the quarter compared with 28% in the prior year. Based on Move’s internal data, average monthly unique users of Realtor.com’s web and mobile sites declined 24% year over year to 72 million. Lead volume declined 30%.

Revenues at REA Group decreased 10% to $222 million because of a $13 million or 6% negative impact from foreign currency fluctuations, lower Australian residential revenues and lower financial services revenues. Australian national residential buy listing volumes declined 12% year over year, with listings in Sydney and Melbourne down 20% and 18%, respectively.

The Subscription Video Services segment’s revenues were $477 million, down 3% year over year. Foreign currency fluctuations adversely impacted the segment’s revenues by 5%. Increased revenues from Kayo and BINGE were driven by a rise in both volume and pricing, partially offset by the impact from fewer residential broadcast subscribers. Foxtel Group streaming subscription revenues represented approximately 26% of total circulation and subscription revenues in the quarter, as compared to 20% in the prior year.

Foxtel’s total closing paid subscribers were more than 4.5 million, reflecting a 6% increase from the prior year, primarily due to the growth in streaming subscribers driven by BINGE and Kayo. Broadcast subscriber churn improved to 12.3% from 14.3% in the prior year. Broadcast average revenue per user for the quarter increased 2% year over year to A$84 (US$57).

Revenues at the Dow Jones segment rose 9% year over year to $529 million. This includes $27 million and $19 million contributions from the acquisitions of OPIS and CMA, respectively. Adjusted Revenues at the Dow Jones segment were flat from the prior year. Digital revenues at Dow Jones represented 79% of total revenues compared with 76% in the prior year.

Circulation and subscription revenues increased 13% to $49 million, which includes the contributions from the acquisitions of OPIS and CMA. Circulation revenues declined 1%, primarily due to lower print volume and lower revenues from IBD, which was partially offset by the continued growth in digital-only subscriptions. Professional information business revenues grew 38%, primarily driven by the acquisitions of OPIS and CMA and growth in Risk & Compliance products. Revenues from the Risk & Compliance products grew 16%, which includes a 3% negative impact from foreign currency fluctuations. Digital circulation revenues accounted for 69% of circulation revenues  compared with 68% in the prior year.

Advertising revenues decreased 14% to $14 million, primarily due to 17% and 8% declines in digital and print advertising revenues, respectively. The decline was due to a continued weakness in the technology and finance categories. Digital advertising accounted for 59% of total advertising revenues compared with 62% in the prior year.

During the third quarter, total average subscriptions to Dow Jones’ consumer products reached more than 5.1 million, up 6% from the prior year. Digital-only subscriptions rose 10%. Total subscriptions to The Wall Street Journal grew 5% to nearly 3.9 million average subscriptions. Digital-only subscriptions to The Wall Street Journal grew 9% to 3.3 million average subscriptions and represented 85% of total Wall Street Journal subscriptions.

The Book Publishing segment reported revenues of $515 million, flat year over year from the prior-year fiscal quarter’s level, mainly due to higher sales in Christian books. Adjusted Revenues increased 2%. Digital sales declined 3% from the prior year due to lower e-book sales. Digital sales represented 23% of Consumer revenues and were in line with the prior year. Backlist sales represented approximately 60% of total revenues in the quarter.

Segment EBITDA for the quarter decreased 9% to $6 million, due to the ongoing supply chain, inventory and inflationary pressures on manufacturing, freight and distribution costs. The decline was partially offset by lower employee costs. These pressures are expected to continue to impact the business in the near term. Adjusted Segment EBITDA decreased 7%.

Revenues in the News Media segment dipped 3% to $563 million. Within the segment, revenues at News Corporation Australia and News UK decreased 5% and 4%, respectively, as both were impacted by negative foreign currency fluctuations. On a constant currency basis, revenues at News Corporation Australia and News UK increased 1% and 6%, respectively. Adjusted Revenues for the segment increased 4%.

Circulation and subscription revenues dipped 4% due to lower print volumes and an 8% adverse impact from foreign currency fluctuations.

Advertising revenues dipped 5% due to negative foreign currency fluctuations of 7% because of a fall in print advertising at News UK and lower revenues at Wireless Group.

Digital revenues represented 36% of News Media segment revenues in the quarter compared with 35% in the prior year and represented 34% of the combined revenues of the newspaper mastheads. As of Mar 31, 2023, The Times and Sunday Times closing digital subscribers, including the Times Literary Supplement, were 494,000 compared with 421,000 in the prior year. New York Post’s digital network reached 147 million unique users in March 2023 compared with 155 million in the prior year.

Other Financial Aspects

News Corporation ended the quarter with cash and cash equivalents of $1,659 million, borrowings of $2,960 million and a stockholders’ equity of $8,077 million, excluding non-controlling interest of $907 million.

Net cash provided by operating activities amounted to $670 million during the third quarter of fiscal 2023. NWSA incurred capital expenditures of $350 million in the said period. Free cash flow available to News Corporation was $258 million.

Zacks Rank & Stocks to Consider

NWSA currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Consumer Discretionary sector are Monro Muffler Brake MNRO and BJ’s Wholesale Club BJ, carrying a Zacks Rank #2 (Buy) and DouYu International DOYU, sporting Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks Rank #1 stocks here.

Monro Muffler Brake and DouYu International are scheduled to report quarterly results on May 18. BJ’s Wholesale Club is scheduled to report its quarterly report on May 23.

The Zacks Consensus Estimate for MNRO’s first-quarter 2023 earnings is pegged at 33 cents per share, unchanged over the past 30 days.

The Zacks Consensus Estimate for BJ’s first-quarter 2023 earnings is pegged at 84 cents per share, unchanged over the past 30 days.

The Zacks Consensus Estimate for DOYU's first-quarter 2023 bottom line is pegged at a loss of 1 cent per share, which increased by 1 cent per share over the past 30 days.


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