News Corp's Fiscal 2023 Third-Quarter Result Shows Easing in Advertising Downturn

Director

Brian Han

News Corp operates in a sector undergoing material changes, with the legacy print-based publishing business model being dismantled by proliferating news and information outlets in the digital space. This is compounded by ever-improving means for consumers to access them, driven by mobility and continuing device innovation. Consequently, News Corporation faces enormous structural headwinds, with consumers migrating from newspapers to the digital arena and advertisers following suit. 

Having said that, we believe News is better placed than peers in the publishing space to transition its print business to the digital age. It has some of the most venerable masthead brands in the industry (The Wall Street Journal, The Times), and boasts significant editorial resources, especially compared with those of its rivals, which have been dwindling. The company's financial position is solid, having split in 2013 from Twenty-First Century Fox, with no debt on the balance sheet. Even with the recent consolidation of Foxtel's debt and a string of acquisitions, News boasts sufficient financial strength to transition the business to the digital age while also exploring opportunities to diversify away from the traditional newspaper business. Recent efforts to simplify the group is also positive, while a USD 1 billion buyback was announced in August 2021.

While News Corporation deals with the structural challenges facing its publishing business, the company was partly shielded by its Australian pay-television operations in 65%-owned Fox Sports and Foxtel. Unfortunately, these two businesses are also coming under severe pressure from digital streaming alternatives to pay TV. On the positive side, the 61%-owned REA Group's growth outlook remains robust in the online real estate classifieds space and the Move (acquired in November 2014) is making strong progress in the U.S. digital property advertising space.

Business Strategy & Outlook

We see News Corporation as having no economic moat. 

The group generates a third of its core earnings from the newspaper and print publishing market--one that is undergoing monumental structural changes. With increasing disintermediation caused by developments in digital technology, the internet, and mobile devices, the industry's traditional stranglehold on consumers is waning rapidly in most developed countries. With dwindling audiences for print-based products, advertisers are also following the eyeballs to the digital arena and migrating away from the medium. Indeed, classified revenue has all but deserted the publishing industry, while display advertising is following fast. Furthermore, with falling newspaper and advertising sales, printing presses are being downsized and, in some cases, dismantled altogether, eliminating one of the main entry costs that traditionally deterred new players from entering the industry. 

There are some properties within News Corporation moat-worthy traits. The Wall Street Journal, housed under the Dow Jones operating unit, is a venerable brand name, especially in the world of global finance. 65%-owned Fox Sports and Foxtel enjoy solid positions in the Australian subscription television programming and distribution market, respectively, although digital streaming is having a material negative impact on subscriber additions and programming costs. As such, management is now investing into the digital subscriber video on demand, or SVOD, space with early progress for Kayo and Foxtel Now streaming services very encouraging. The company owns 61% of REA Group, the number-one digital player in the lucrative Australian real estate listing and advertising space. However, the qualities of network effect and efficient scale in these assets are collectively not significant enough to warrant assigning a moat to the entire News Corporation group.

None

Economic Moat

News Corp

HarperCollins Publishers L.L.C. is one of the world's largest publishing companies and is one of the Big Five English-language publishing companies, alongside Hachette, Macmillan, Penguin Random House, and Simon & Schuster. The company is headquartered in New York City and is a subsidiary of News Corp. The name is a combination of several publishing firm names: Harper & Row, an American publishing company acquired in 1987 (whose own name was the result of an earlier merger of Harper & Brothers (founded 1817) and Row, Peterson & Company), together with UK publishing company William Collins, Sons (founded 1819), acquired in 1990.

Harper Collins Publishers

The Wall Street Journal is a U.S. business-focused, English-language international daily newspaper based in New York City. The Journal, along with its Asian and European editions, is published six days a week by Dow Jones & Company, a division of News Corp. The newspaper is published in the broadsheet format and online.

Wall Street Journal

The New York Post is a daily newspaper in New York City. The Post also operates the celebrity gossip site PageSix.com, the entertainment site Decider.com, and co-produces the television show Page Six TV.

New York Post

News Corp. is a media and information services company, which engages in the creation and distribution of content and other services. It operates through the following segments: Digital Real Estate Services, Subscription Video Services, Dow Jones, Book Publishing, News Media, and Other. The Digital Real Estate Services segment refers to the firm’s interest in the REA Group, a company with operations focused on property and property-related advertising and services, as well as financial services. The Subscription Video Services segment provides sports, entertainment and news services to pay-TV and streaming subscribers and other commercial licensees, primarily via cable, satellite and internet distribution. The Dow Jones segment offers news and business information, which distributes content and data through a variety of owned and off-platform media channels including newspapers, newswires, websites, mobile apps, newsletters, magazines, proprietary databases, live journalism, video and podcasts. The Book Publishing segment is composed of HarperCollins, which publishes and distributes consumer books globally through print, digital and audio formats. The News Media segment includes the operations of News Corp Australia, News UK, and the New York Post. The Other segment represents general corporate overhead expenses, costs related to the U.K. Newspaper Matters and expenses associated with the company’s cost reduction initiatives. The company was founded in 1979 and is headquartered in New York, NY.

Earnings data Q2 2023

Revenue

Cost of revenue

Gross profit

Operating expenses

SG&A

Other

Operating income

EBITDA

Net income

Earnings per share

Total assets

Current assets

Cash & equivalents

Receivables

Inventory

Non-current assets

Net PPE

Intangibles

Total liabilities

Current liabilities

Short term debt

Income tax payable

Non-current liabilities

Long-term debt

Total equity

Stockholders equity

Minority interest

Total liabilities & equity

Total debt

Net debt

Book value per share

Cash from operations

Funds from operations

Change in working capital

Cash from investing

Capital expenditure

Purchase/sale of investments

Purchase/sale of business

Other sources

Cash from financing

Change in stock

Change in debt

Cash dividends paid

Cash from other sources

Net change in cash

Free cash flow

Thomson, CEO of The Post's parent company, cited "extreme revenue pressure" and "the uncertain macroeconomic times ahead" for the news business.

News Corp CEO Robert Thomson warns AI could ‘fatally undermine' journalism

Tucker Carlson recently got fired from Fox News (owned by News Corp). This week he announced that he was starting a Twitter show.

Tucker Carlson's Twitter Show Is Likely Bad News For News Corp

News Corporation's (NWSA) third-quarter 2023 results reflect a year-over-year decline in both earnings and revenues.

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

News Corporation (NASDAQ:NWSA ) Q3 2023 Earnings Conference Call May 11, 2023 12:00 PM ET Company Participants Michael Florin - Senior VP and Head of IR Robert Thomson - CEO and Director Susan Panuccio - CFO Conference Call Participants David Karnovsky - JPMorgan Kane Hannan - Goldman Sachs Craig Huber - Huber Research Darren Lung - Macquarie Alan Gould - Loop Capital Operator Welcome to News Corp's Third Quarter Fiscal 2023 Earnings Conference Call. Today's conference is being recorded.

News Corporation (NWSA) Q3 2023 Earnings Call Transcript

News Corp. (NWSA) came out with quarterly earnings of $0.09 per share, beating the Zacks Consensus Estimate of $0.06 per share. This compares to earnings of $0.16 per share a year ago.

News Corp. (NWSA) Q3 Earnings and Revenues Surpass Estimates

The Wall Street Journal gained 132,000 digital subscriptions in latest quarter.

News Corp Revenue Slips Amid Challenging Ad Market

News Corp NWSA, +0.48%, the parent of MarketWatch publisher Dow Jones, reported fiscal third-quarter results on Thursday that beat expectations, helped by revenue trends outside advertising and a “decidedly more positive” economic backdrop, and the media company said it expected to save more than it once expected from planned layoffs. Shares rose 1.7% in after-hours trade on the news.

News Corp stock rises as results beat, despite ‘clearly insipid' advertising backdrop

We expect NWSA's stock to trade higher due to revenues and earnings beating expectations in its third-quarter results.

News Corp's Stock To Likely Trade Higher Post Q3?

Faraday Future Intelligent Electric

Petroleo Brasileiro

In morning trading on Wednesday, the Dow Jones industrials were down 0.12%, while the S&P 500 was up 0.34% and the Nasdaq 0.97% higher.

Earnings Previews: Faraday Future, News Corp, Petrobras

News Corporation's (NWSA) third-quarter fiscal 2023 performance is likely to have benefited from the robust demand for carbon credit indices and the integration of OPIS and CMA.

News Corporation (NWSA) to Report Q3 Earnings: What's in Store?

NEW YORK--(BUSINESS WIRE)--News Corp will release its third quarter Fiscal 2023 results on Thursday, May 11, 2023. News Corp Chief Executive Robert Thomson and Chief Financial Officer Susan Panuccio will discuss the results via a live audio webcast at 5:00 p.m. EDT (Sydney: Friday, May 12, at 7:00 a.m. AEST). To listen to the webcast, please register using the following link: https://newscorp-q3fy2023-earnings-call.open-exchange.net/ A live audio webcast of the call and the archived webcast wil.

News Corp to Report Fiscal 2023 Third Quarter Earnings

News Corp. (NWSA) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Analysts Estimate News Corp. (NWSA) to Report a Decline in Earnings: What to Look Out for

Twenty-First Century Fox

News Corp (NASDAQ:NWS) shares took a brief tumble Monday afternoon after Fox News Media announced that Tucker Carlson would be parting ways with the company.  Carlson is Fox New's most-watched anchor, with this 8 pm time slot drawing an average of 3.25 million viewers in the first quarter of 2023.

Tucker Carlson out at Fox News after $787M Dominion defamation settlement; News Corp shares fall

Fox Corporation Class A

NEW YORK (AP) — Fox News said near midday on Monday that it has agreed to part ways with Tucker Carlson, its popular and controversial primetime host, less than a week after settling a lawsuit over the network's 2020 election reporting.

‘Tucker Carlson Tonight' program aired for the last time on Friday: Fox News

NWSA stock fell from around $21 to $18 over the last twelve months, underperforming the broader indices, with the S&P also falling about 6% over the same period.

What's Happening With News Corp Stock?

NEW YORK--(BUSINESS WIRE)--News Corp announced today that Chief Executive Robert Thomson will participate in the Morgan Stanley Technology, Media & Telecom Conference on Tuesday, March 7, 2023. The session will begin at 2:40pm PST.

News Corp to Participate in the Morgan Stanley Technology, Media & Telecom Conference

CoStar Group

News Corp had been in talks to sell the parent of Realtor.com to CoStar for about $3 billion.

CoStar Group CEO Says Firm Not Acquiring Move Real Estate Business From News Corp

NWSA is a media conglomerate with brands like The Wall Street Journal, Herald Sun, and The Times, operating in US, UK, and Australia. The Murdoch family trust controls 39.4% of NWSA's voting interest.

News Corporation: Navigating The Publishing Industry's Shift To Digital

News Corp (NASDAQ:NWS) said it will be reducing its headcount by 5% or 1,250 jobs as a slowdown in advertising spend by businesses due to rising interest rates and high inflation dented the media conglomerate's fiscal second quarter 2023 earnings.   Shares of News Corp (NASDAQ:NWS), which owns publications such as The Wall Street Journal, the New York Post, and The Australian, were trading down 9% at about US$18.97 shortly after the stock market opened on Friday.

News Corp to cut 1,250 jobs after second quarter earnings miss

News Corp. (NASDAQ: NWSA ) layoffs are on the way after the company announced plans to cut jobs throughout 2023. News Corp. has revealed it will cut 1,250 jobs by the time 2023 comes to an end.

News Corp. Layoffs 2023: What to Know About the Latest NWSA Job Cuts

News Corporation (NASDAQ:NWSA ) Q2 2023 Results Conference Call February 9, 2023 5:00 PM ET Company Participants Michael Florin - Senior VP and Head of IR Robert Thomson - CEO and Director Susan Panuccio - CFO Conference Call Participants Kane Hannan - Goldman Sachs David Karnovsky - JPMorgan Craig Huber - Huber Research Entcho Raykovski - Credit Suisse Alan Gould - Loop Capital Brian Han - Morningstar Johnny Huynh - Evans & Partners Darren Lung - Macquarie Operator Welcome to News Corp's Second Quarter Fiscal 2023 Earnings Conference Call. Today's conference is being recorded.

News Corporation (NWSA) Q2 2023 Earnings Call Transcript

News Corp. (NWSA) delivered earnings and revenue surprises of -44% and 4.50%, respectively, for the quarter ended December 2022. Do the numbers hold clues to what lies ahead for the stock?

News Corp. (NWSA) Lags Q2 Earnings and Revenue Estimates

News Corp, which owns The Wall Street Journal and HarperCollins, said it would cut 1,250 positions this calendar year

News Corp said it will cut 1,250 positions this calendar year

Rupert Murdoch's News Corp., home to media properties including the Wall Street Journal, Dow Jones and HarperCollins, announced as it released disappointing quarterly results that it is laying off 5% of its workforce. The company reported revenue of $2.52 billion, a shade below Wall Street analysts' consensus expectation for $2.55 billion, according to Refinitiv.

Rupert Murdoch's News Corp Reveals Plan To Lay Off 5% Of Workers After Quarterly Earnings Miss

Reduced ad spends due to rising inflation and higher interest rates have battered Rupert Murdoch's media conglomerate

News for News Corp Stock (NWSA)