What To Expect From News Corp’s Q4 Results
News Corp (NASDAQ: NWSA) is scheduled to announce its fourth quarter fiscal 2018 results on Thursday, August 9. The company reported better-than-expected fiscal third quarter results, as its revenue came in ahead of market expectations and EPS was in line. In Q3, the company’s revenues grew 6% year-over-year (y-o-y) to $2.1 billion, primarily due to continued growth in the Digital Real Estate business and broad growth in other segments as well. However, the company’s total earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 15% y-o-y. The media company reported a loss per share of $1.94 compared to a loss of $1 in the prior year. The loss was primarily driven by the pretax non-cash write-downs of $998 million related to Foxtel and Fox Sports Australia consolidation. The company’s adjusted earnings per share declined 13% y-o-y to $0.06.
News Corp plans to consolidate Foxtel and Fox Sports Australia (including Sky News), which will be reflected in the newly formed revenue segment – subscription video services. This consolidation will make circulation and subscription revenues the biggest revenue stream for News Corp for the first time, guarding the company against the volatile advertising market. Overall, the company expects subscriber trends at Foxtel to be relatively similar to the prior quarter, but also expect some additional OTT investment. Our $17 price estimate for News Corp’s stock is almost 10% ahead of the current market price. We have created an interactive dashboard on what to expect from News Corp’s 2018 earnings which outline our forecasts for the company’s Q4 and fiscal 2018 results. You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation. In Q4, we expect the company’s revenues to be driven by continued growth in the Digital Real Estate Services and broad growth in other segments as well. However adjusted EPS could decline due to the Foxtel and Fox Sports Australia consolidation.
Digital Real Estate: Strong Growth Driver
The Digital Real Estate segment posted strong growth on the back of higher revenues at both the REA Group and Move in the third quarter. We expect this trend to continue in the near term, and accordingly, expect the company to post strong numbers in the Digital Real Estate segment in the fiscal fourth quarter, including incremental revenues from the expansion into the mortgage brokerage business. The revenue growth at REA could show some improvement in listing volumes. In addition, the company also anticipates hiring investment spending to drive traffic and support new products.
Future Outlook
In the upcoming quarter, the digital real estate and cable TV businesses are expected to account for significantly more than half of News Corp profits combined. Foxtel is expected to include a transaction cost in the $10 million to $15 million range. In Book Publishing, News Corp expects to realize over $20 million in additional revenues in the fourth quarter from the agreement with Amazon to license Lord of the Rings for a TV series. In the News and Information segment, we expect the company to post flat overall sales during the quarter, due to a continued downtrend in the segment. For full-year, we expect News Corp to continue focusing on fiscal discipline and maintaining strict control over its operating expenses to grow its margins.
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