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News Corporation Misses on Q4 Earnings, Revenue Falls Y/Y

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A soft advertising environment weighed upon Rupert Murdoch controlled diversified media conglomerate, News Corporation (NWSA) that reported lower-than-expected fourth-quarter fiscal 2014 results, despite effective cost management. The publisher of The Wall Street Journal and New York Post recorded quarterly earnings of 1 cent a share that missed the Zacks Consensus Estimate of 4 cents, and dropped sharply from 12 cents delivered in the prior-year quarter. Softness did persist across the company’s Australian newspaper.

Including one-time items, the company reported quarterly earnings of 2 cents a share compared with a loss of $1.94 in the year-ago quarter.

The company is in a transitionary phase looking to diversify its revenue streams and expanding its digital properties via product launches and accretive acquisitions. News Corporation acquired Storyful, a step in the direction of enhancing online video offerings. It also completed the buyout of Harlequin Enterprises Limited from Torstar Corporation. Harlequin, which will form part of the HarperCollins Publishers, is a leading publisher of women’s fiction and would help in augmenting its presence primarily in Europe and Asia Pacific.

News Corporation, which has a 61.6% stake in the digital real estate services company, REA, informed that the latter has acquired 17.2% stake in iProperty Group Limited, which has online property advertising operations in Malaysia, Indonesia, Hong Kong, Macau and Singapore with investments in the Philippines and India.

News Corporation, which split from Twenty-First Century Fox, Inc. (FOXA) on Jun 28, 2013, said that total revenue for the quarter came in at $2,186 million, down 3% from the year-ago quarter but came ahead of the Zacks Consensus Estimate of $2,179 million.

Total revenue of this Zacks Rank #4 (Sell) stock was adversely affected by a decline in advertising revenue at the News and Information Services division, the sale of the Dow Jones Local Media Group and adverse impact of foreign currency fluctuations. This was partly offset by the sturdy performance across the Digital Real Estate Services and Book Publishing divisions.

Total advertising revenue dropped 6% to $1,029 million, while circulation and subscription revenue fell 3% to $683 million. Consumer revenue increased 8.5% to $344 million.

Segments Performance

We observe that revenue across the News and Information Services segment fell 6% year over year to $1,558 million primarily due to waning advertising revenue and the sale of the Dow Jones Local Media Group. Total segment advertising revenue dipped 9%, whereas circulation revenue tumbled 4%. Adjusted segment EBITDA plunged 34% to $136 million.

The Cable Network Programming segment revenue came in at $136 million, down 7% from the year-ago quarter, however, adjusted EBITDA was $21 million, up 11% year over year.

Revenue at the Digital Real Estate Services segment soared 24% year over year to $113 million, whereas adjusted EBITDA surged 41% to $65 million.

The Book Publishing segment, which consists of HarperCollins Publishers, reported revenue of $361 million, up 10% from the prior-year period, reflecting robust performance of the Divergent series by Veronica Roth. On the other hand, e-book sales surged 23%, contributing 22% of consumer revenue.

Adjusted EBITDA for News Corporation’s business book publishing, which competes with e-book devices sold by Amazon.com Inc. (AMZN) and Apple Inc. (AAPL), came in at $33 million, increasing 43% year over year.

Revenue at the Digital Education division plummeted 28% to $18 million, whereas adjusted EBITDA for the segment was a loss of $53 million compared with a loss of $52 million in the prior period. Fall in project-based consulting revenue at Amplify Insight impacted the results.

Other Financial Aspects

News Corporation ended the quarter with cash and cash equivalents of $3,145 million, amount due from Twenty-First Century Fox of $66 million, and shareholders’ equity of $13,243 million, excluding non-controlling interest of $156 million.

Capital expenditures for fiscal 2014 were $379 million, while the company generated free cash flow of $365 million.

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