NWSA Financial Analysis

Analysis Date: 2/6/2025

Business Model

News Corporation is a global, diversified media and information services company. Revenue is generated across various segments: Dow Jones (Professional Information, Consumer Subscription, Advertising), Digital Real Estate Services (REA Group, Realtor.com), Book Publishing (HarperCollins), and News Media (News UK, News Corp Australia, New York Post, etc.).

Revenue Sources

• Circulation and Subscription Revenue: Generated from sales of newspapers, magazines, and digital subscriptions across Dow Jones and News Media segments and digital real estate subscriptions.
• Advertising Revenue: Generated from print and digital advertising across Dow Jones and News Media segments and digital real estate advertising.
• Real Estate Revenue: Primarily from REA Group and Realtor.com through listings and related services.
• Consumer Revenue: Primarily from Book Publishing (HarperCollins) through physical and digital book sales and Dow Jones consumer subscriptions.
• Professional Information Business Revenue: From Dow Jones Risk & Compliance and Dow Jones Energy, providing data and analytics to businesses.

Income Statement Analysis

• Total Revenue increased by 5% year-over-year, driven by growth in Digital Real Estate Services, Book Publishing, and Dow Jones segments. (Pro)
• Net Income from continuing operations surged by 58% year-over-year, indicating improved profitability. (Pro)
• Operating expenses slightly decreased by 0.7% year-over-year, showing cost management. (Pro)
• Selling, general and administrative expenses increased by 4.2%, which is in line with revenue growth and business expansion. (Neutral)
• Equity losses of affiliates significantly increased, but the absolute value is still small. (Neutral)
• Interest expense decreased by 57%, positively impacting net income. (Pro)
• Other, net showed a significant positive change, contributing to the increase in net income. (Pro)

Balance Sheet Analysis

• Cash and cash equivalents decreased by 6.5%, which could be due to investments or operational usage, but remains healthy at $1.75 billion. (Neutral)
• Receivables and Inventory increased, potentially indicating higher sales or buildup of stock. (Neutral, needs further investigation if inventory buildup is concerning)
• Current Assets Held for Sale significantly increased, reflecting the classification of Foxtel assets as held for sale due to the DAZN deal. (Informative, related to strategic decision)
• Total Assets decreased slightly by 3.2%, primarily due to the classification of Non-current Assets Held for Sale in previous period and decrease in other non-current assets. (Neutral)
• Accounts Payable increased significantly by 43.3%, potentially indicating stretched payment terms or increased purchasing. (Neutral, needs further investigation)
• Accrued Expenses and Deferred Revenue decreased, which could be due to the timing of payments and revenue recognition. (Neutral)
• Current Liabilities Held for Sale increased significantly, reflecting the classification of Foxtel liabilities as held for sale. (Informative, related to strategic decision)
• Borrowings decreased by 6.9%, indicating debt reduction. (Pro)
• Total Equity remained relatively stable. (Neutral)

Capital Allocation

News Corp declared a semi-annual cash dividend of $0.10 per share for Class A and Class B Common Stock, payable on April 9, 2025. The company has an ongoing stock repurchase program authorized up to $1 billion. In the six months ended December 31, 2024, $78 million was used for share repurchases. Management is focused on reinvesting in core growth pillars and digital development, as evident from their commentary on digital real estate and Dow Jones. Proceeds from the Foxtel sale are expected to further strengthen the balance sheet and provide financial flexibility.

Management Commentary

News Corp had a fruitful quarter, qualitatively and quantitatively. Revenues on a continuing operations basis, which excludes Foxtel, grew 5 percent to $2.24 billion, net income from continuing operations surged 58 percent to $306 million and Total Segment EBITDA rose 20 percent to $478 million.

The three pillars of growth—Digital Real Estate, Dow Jones and Book Publishing—continued to expand Segment EBITDA robustly.

We also saw the positive impact of rigorous cost discipline and digital development in the News Media segment, and our overall margin rose meaningfully compared to the prior year.

We are providing priceless content for Generative AI, and remain vigilant in our pursuit of degenerative AI. We are pleased with our partnership with OpenAI and hope that other companies in the segment take a similarly enlightened approach.

Overall ad trends moderated [in News Media].

Advertising revenue of a hundred and $21,000,000 moderated from the prior quarter to a decline of 4% year over year as print declined 10% with digital flat, an improvement from the first quarter [in Dow Jones].

Realtor’s revenue for the quarter of a hundred and 30 million dollars were up 2% compared to the prior year, marking the first year over year improvement since the fourth quarter of fiscal twenty twenty two. At realtor, real estate revenues were essentially flat as lower referral and lead generation revenues were largely offset by accelerating growth from adjacencies. Lead volumes fell 2% while average monthly unique users for the quarter fell 6% year over year to 62,000,000 at realtor.com.

News Media, while we expect the segment to continue to benefit from lower talk TV cost together with savings associated with the new commercial printing joint venture with DMG in The UK, advertising conditions remain difficult with limited visibility and coupled with forex headwinds, we anticipate a more challenging second half.

Overall Sentiment: Positive. Management expresses confidence in the company's performance and future prospects, highlighting growth in key segments and strategic initiatives like the Foxtel sale and AI partnerships. While there are mentions of moderated ad trends and challenges in News Media's second half, the overall tone is optimistic, focusing on simplification, digital growth, and shareholder value enhancement.

Recommendation

Rating: Buy

Reason for Rating: Based on the strong Q2 2025 performance, driven by revenue and profit growth, strategic simplification through the Foxtel sale, and positive management outlook, a 'Buy' recommendation is warranted. The company's core growth pillars are performing well, and cost discipline is contributing to margin expansion. Increased free cash flow and a focus on shareholder returns further support a positive investment outlook.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/6/2025, 5:11:08 AM