News Corp Beats Q3 Estimates On Growth In Digital Advertising, Digital Real Estate Services
News Corp (NASDAQ:NWSA) reported solid third quarter results, as both its revenue and earnings per share exceeded market expectations. In Q3, the company’s revenue increased 5% year-over-year (y-o-y) to $2 billion, largely on the back of growth at the News and Information Services segment, driven by News America Marketing and the acquisitions of Australian Regional Media and Wireless Group, as well as continued strong performance at the Digital Real Estate Services and Book Publishing segments. However, this growth in revenues was partially offset by lower print advertising revenues. The News and Information Services segment was a sort of growth this quarter, both in revenues and EBITDA, driven by the stellar performance of installed product revenues in News America Marketing, healthy circulation revenue gains at the Wall Street Journal and a thoughtful cost production program.
In addition, the company’s total adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $215 million, compared to ($122) million in the prior year, driven by continued growth in the Digital Real Estate Services and News America Marketing. The Digital Real Estate segment posted strong growth on the back of higher revenues at both REA Group and Move in the third quarter. The media company also posted adjusted earnings of 7 cents per share, up 75% y-o-y.
Digital Real Estate – The Engine Of Growth
In the third quarter, the total segment revenues increased 13% y-o-y to $219 million and segment’s EBITDA also grew by a strong 92% y-0-y to $75 million due to strong contribution of both REA Group and Move.
At REA, revenues grew 10% y-o-y due to an increase in Australian residential depth revenue, benefiting from favorable product mix and higher prices. This was partially offset by the decline in revenue resulting from the sale of REA Group’s European business in December 2016. Average monthly unique users of realtor.com’s web and mobile sites for the fiscal third quarter grew 9% y-o-y to approximately 55 million; traffic in March grew 13% y-o-y to over 58 million monthly unique users. [1]
News And Information Grew On Digital Advertising, Rise In Digital WSJ Subscribers
The News and Information Services segment witnessed a 3% y-o-y increase in its revenues in the third quarter. The revenue increase was mainly due to a 4% y-o-y increase in advertising, driven by News America marketing and contributions from acquisitions partially offset by print advertising declines. The segment’s circulation and subscription revenues decreased 1% y-o-y, due to higher subscription pricing and selected cover price increases, partially offset by lower print volume. Additionally, the segment’s EBITDA was reported at $123 million, driven by in-store product and modest year-over-year improvements at Dow Jones and UK, offset by declines in the Australian business.
Digital revenues represented 24% of the segment revenues in the quarter, which included more than 300,000 subscribers year-over-year. In fact, Wall Street Journal’s digital subscriptions accounted for 53% of its total subscriptions, up from 44% last year.
Book Publishing Revenues Could Grow In Near Term
In Book Publishing, HarperCollins reported a 4% y-o-y increase in revenues for the third quarter, which was largely due to growth in digital revenues and enduring success of Hillbilly Elegy and Hidden Figures. In the third quarter, the segment’s total digital revenues, which included audio books, accounted for approximately 22% of consumer revenues, with digital sales rising 7% y-o-y. Also, the segment’s EBITDA grew 3% y-o-y versus the prior year.
Guidance
In Digital Real Estate services, News Corp expects to see improved revenues and continued strong EBITDA contribution at realtor.com. However, the company expects growing costs at REA in the fourth quarter versus the prior year, due to increased investment in product innovation. Reuters’ compiled analyst estimates forecast revenues of $2.13 billion and earnings per share of $0.13 in Q3 2017.
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Notes:- News Corporation’s (NWSA) CEO Robert Thomson on Q3 2017 Results, Seeking Alpha, May 9 2017 [↩]