News Corp Beats on Earnings, Down Y/Y - Analyst Blog

Despite a soft advertising environment, Rupert Murdoch controlled diversified media conglomerate, News Corporation NWSA reported better-than-expected third-quarter fiscal 2014 results on the back of effective cost management. The publisher of The Wall Street Journal and the New York Post recorded quarterly earnings of 11 cents a share that surpassed the Zacks Consensus Estimate of 3 cents but tumbled 15% from 13 cents delivered in the prior-year quarter. Softness did persisted across the company's Australian newspaper.

Including one-time items, the company reported quarterly earnings of 8 cents a share, substantially down from 56 cents in the year-ago quarter.

News Corporation appointed William Lewis as Chief Executive Officer of Dow Jones, with immediate effect. Moreover, the company recently entered into a deal to acquire Harlequin Enterprises Limited from Torstar Corporation for about $415 million. Harlequin, which will form part of the Book Publishing segment, is a leading publisher of women's fiction.

The company, which split from Twenty-First Century Fox, Inc. FOXA on Jun 28, 2013, said that total revenue for the quarter came in at $2,078 million, down 5% from the year-ago quarter but came ahead of the Zacks Consensus Estimate of $2,063 million.

Total revenue of this Zacks Rank #3 (Hold) stock was adversely affected by a decline in advertising revenue at the News and Information Services division, the sale of the Dow Jones Local Media Group and adverse impact of foreign currency fluctuations. This was partly offset by the sturdy performance across the Digital Real Estate Services and Book Publishing divisions.

Total advertising revenue dropped 9% to $952 million, while circulation and subscription revenue fell 5% to $665 million.

Segments Performance

We observe that revenue across the News and Information Services segment fell 9% year over year to $1,488 million primarily due to waning advertising revenue and the sale of the Dow Jones Local Media Group. Australian newspapers revenue tumbled 21%, while total segment advertising revenue dipped 10%. Adjusted segment EBITDA decreased 11% to $146 million.

The Cable Network Programming segment revenue came in at $113 million, down 10% from the year-ago quarter, while adjusted EBITDA was $31 million, up 24% year over year. Increase in digital platform subscribers as well as higher affiliate pricing failed to offset the negative impact of foreign currency fluctuations that led to revenue decline.

Revenue at the Digital Real Estate Services segment soared 19% year over year to $102 million, whereas adjusted EBITDA surged 49% to $61 million.

The Book Publishing segment, which consists of HarperCollins Publishers, reported revenue of $354 million, up 14% from the prior-year period, reflecting robust performance of the Divergent series by Veronica Roth. On the other hand, e-book sales surged 46%, contributing 26% of revenue.

Adjusted EBITDA for News Corporation's book publishing business, which competes with e-book devices sold by Amazon.com Inc. AMZN and Apple Inc. AAPL, came in at $53 million, increasing 77% year over year.

The Other segment, which comprises Amplify, a digital education business, posted revenue of $21 million that plunged 22% from the previous-year quarter. The divestment of Australian digital businesses in fiscal 2013 and fall in project-based consulting revenue impacted the results. Adjusted EBITDA for the segment was a loss of $83 million compared with a loss of $58 million in the prior period.

Other Financial Aspects

News Corporation ended the quarter with cash and cash equivalents of $3,207 million, amount due from Twenty-First Century Fox of $91 million, and shareholders' equity of $13,034 million, excluding non-controlling interest of $134 million.

Capital expenditures for the first nine months of fiscal 2014 were $244 million, while the company generated free cash flow of $496 million.