News Corp Beats Q1 Estimates On Digital Real Estate Growth
News Corp (NASDAQ: NWSA) reported strong fiscal first quarter results, as its earnings per share and revenues came in ahead of market expectations. The company’s stock moved up slightly after the announcement. Below we highlight some of the most notable items from the earnings release.
- In Q1, the company’s revenue grew 5% year-over-year (y-o-y) to $2 billion, largely on the back of broad gains across segments – particularly Digital Real Estate – the acquisitions of Australian Regional Media and Wireless Group, and a mildly positive impact from foreign currency fluctuations. However, this growth was partially offset by lower print advertising revenues at the News and Information Services segment.
- The company’s total earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $249 million, up 92% y-o-y, primarily due to strong growth in the Digital Real Estate segment. The company also posted adjusted earnings of 7 cents per share, compared to -$0.01 in the prior year.
- News Corp’s circulation and subscription revenues grew 5% y-o-y to $651 million, largely due to a healthy contribution from Dow Jones, higher subscription pricing and selected cover price increases at News Corp Australia and News UK.
- In the first quarter, Digital Real Estate segment revenues increased 20% y-o-y to $271 million, and the segment’s EBITDA further grew 42% y-0-y to $95 million, largely due to continued growth at REA Group and Move.
- At REA, revenues grew 22% y-o-y due to an increase in Australian residential depth revenue, benefiting from favorable product mix and higher prices, and the acquisition of Smartline. This was partially offset by the decline in revenue resulting from the sale of REA Group’s European business in fiscal 2017. The average monthly unique users of realtor.com’s web and mobile sites for the fiscal first quarter grew to around 55 million.
- The News and Information Services segment witnessed a 2% y-o-y increase in its revenues in the first quarter. This growth in revenues was mainly due to strong contributions from Dow Jones (2%) and News Corp Australia (4%), partially offset by declines at News UK (-6%) and News America Marketing (-4%). Additionally, the segment’s EBITDA was reported at $73 million, up 59% y-o-y, driven by revenue growth and lower expenses at Dow Jones, lower investment spending at Checkout 51, the absence of transaction costs associated with the acquisition of Wireless Group, as well as lower expenses due to ongoing cost efficiencies. Digital revenues represented 27% of the segment revenues in the quarter.
- In Book Publishing, HarperCollins reported a 3% y-o-y increase in revenues for the first quarter, due to the continued popularity of Hillbilly Elegy, The Subtle Art of Not Giving a F*ck, as well as the success of frontlist titles such as House of Spies and The Good Daughter. In the first quarter, the segment’s total digital revenues, which include audio books, accounted for approximately 21% of consumer revenues. Also, the segment’s EBITDA grew 4% y-o-y to $50 million in the quarter.
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Our $14.5 price estimate for News Corp’s stock is about in line with the current market price.
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