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News Corporation (NWSA) Q4 Earnings Beat, Revenues Miss

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Rupert Murdoch-controlled, News Corporation NWSA reported third straight quarter of positive earnings surprise, when it posted fourth-quarter fiscal 2017 results. Meanwhile, the top line fell short of the estimate, after surpassing the same in the preceding quarter. The quarter marked robust performance of Digital Real Estate Services. However, News and Information Services, Book Publishing and Cable Network Programming segments hurt the results. The company has been concentrating on cost cutting and augmenting digital subscriber base to offset sluggish print advertising demand.

News Corporation registered adjusted earnings of 11 cents a share that outpaced the Zacks Consensus Estimate by a couple of cents and improved by a penny from the year-ago quarter. Including one-time items, the publisher of The Wall Street Journal reported net loss from continuing operations of 74 cents a share compared with earnings of 16 cents posted in the prior-year period.

News Corporation, which split from Twenty-First Century Fox, Inc. FOXA, stated that its total revenue for the reported quarter was $2,080 million, down 7% from the year-ago quarter and also came below the Zacks Consensus Estimate of $2,111 million. The company’s adjusted revenue (excluding the impact of acquisitions, foreign currency fluctuations and divestitures) came in at $2,048 million, reflecting a year-over-year decline of 7%.

News Corporation Price, Consensus and EPS Surprise


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

Both advertising and circulation and subscription revenues declined 8% to $737 million and $636 million, respectively. Consumer revenues fell 6% to $390 million, while revenues from real estate inched up 1% to $171 million. Meanwhile, Other revenues remained flat at $146 million.

News Corporation is in a transitional phase, looking to diversify revenue streams, along with expanding digital properties through product launches and accretive acquisitions. These have helped the stock to gain 19.3% so far in the year compared with the industry’s growth of 1.8%.

Segmental Performance

Revenue from the News and Information Services segment declined 10% year over year to $1,281 million in the reported quarter. Advertising revenue tumbled 12% to $650 million due to sluggishness in the print advertising market, reduced in-store product revenue at News America Marketing and adverse foreign currency fluctuations. This was partly offset by contributions from the buyouts of Australian Regional Media and Wireless Group.

Circulation and subscription revenue decrease 9% to $511 million on account of adverse foreign currency fluctuations and fall in print volume. Digital revenue accounted for 26% of segment revenue in the quarter under review compared with 23% in the year-ago period. Adjusted segment EBITDA plunged 38% during the quarter to $100 million.

The Book Publishing segment reported revenue of $407 million, down 6% from the prior-year period owing to adverse foreign currency fluctuations and fall in sales at the Children’s division. Digital sales constituted 20% of Consumer revenue compared with 19% in the prior year. Adjusted EBITDA plummeted 20% to $40 million.

Revenues at the Digital Real Estate Services segment advanced 10% year over year to $251 million on the back of sustained growth witnessed across REA Group Limited (up 7%) and Move (up 10%). However, the growth was partly offset by the divestiture of REA Group’s European business and the sale of Move’s TigerLead product. Adjusted EBITDA soared 67% to $87 million.

The Cable Network Programming segment’s revenues came in at $140 million, down 5% on account of the additional week in the prior year and decline in affiliate revenue at FOX SPORTS Australia. This was partly mitigated by the buyout of Australian News Channel and favorable foreign currency fluctuations. Adjusted EBITDA rose 4% to $24 million.

Other Financial Aspects

News Corporation, which carries a Zacks Rank #4 (Sell), ended the quarter with cash and cash equivalents of $2,016 million, borrowings of $276 million and shareholders’ equity of 10,789 million, excluding non-controlling interest of $284 million.

Capital expenditures of $256 million were incurred during fiscal 2017, while free cash flow available to the company was $113 million.

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