Diving Into News Corp's Q2 Earnings

News Corporation NWSA reported fifth straight quarter of positive earnings surprise, when it posted second-quarter fiscal 2018 results. Also, revenues surpassed the Zacks Consensus Estimate for the second consecutive quarter. Results gained from sturdy performance at the Digital Real Estate Services and the Cable Network Programming segments.

However, the stock did not have much impact in the after-hours trading on Feb 8. Shares of the company have gained 14.4% in the past six months, underperforming the industry's rally of 21.9%.

News Corporation Price, Consensus and EPS Surprise

News Corporation Price, Consensus and EPS Surprise | News Corporation Quote

Segment Details

Revenues from the News and Information Services segment remained flat year over year to $1,298 million in the reported quarter. At News UK, News Corp Australia and Dow Jones the top line increased 7%, 4% and 1%, respectively. However, at News America Marketing the metric decreased 16%. Further, the segment's adjusted revenues declined 5% from the year-ago quarter.

Advertising revenues fell 6% due to soft home delivered revenues at News America Marketing, mainly attributable to two fewer free-standing inserts as well as lower custom publishing revenues. Also, softness in the print advertising market along with the decision to stop The Wall Street Journal's international print editions in the quarter impacted the results. These were somewhat mitigated by contributions from the buyout of ARM, a modest growth of advertising revenues at News UK, and foreign currency tailwinds.

Circulation and subscription revenues grew 6% on account of strong contribution from Dow Jones, reflecting nearly 10% growth in the circulation revenues, persistent increase in digital subscriber at The Wall Street Journal along with sturdy growth at its professional information business. Furthermore, the contributions from ARM buyout, rise in cover and subscription price, and favorable currency impact aided revenue growth. The improvement was partly compensated with diminished newsstand volume at News UK.

In the quarter under review, digital revenues accounted for 29% of segment revenues compared with 26% in the year-ago period. Adjusted segment EBITDA fell 7% to $134 million.

The Book Publishing segment reported revenues of $469 million, up 1% from the prior-year period. Digital sales, which constituted 16% of Consumer revenue, rose 2% from the prior-year quarter owing to increase in downloadable audio book sales. However, the segment's adjusted revenue dipped 1% in the fiscal second quarter while adjusted EBITDA was up 5% to $79 million.

Revenues at the Digital Real Estate Services segment advanced 21% year over year to $292 million on the back of sustained growth witnessed across REA Group (up 24%) and Move (up 18%). However, growth was partly compensated with the divestiture of REA Group's European business and the sale of Move's TigerLead product. Further, the segment's adjusted revenues were up 18%. Also, adjusted EBITDA grew 22% to $115 million.

The Cable Network Programming segment's revenues came in at $120 million, up 15% on account of the buyout of ANC and rise in affiliate revenue at FOX SPORTS Australia. The segment's adjusted revenues also grew 6% in the quarter. However, adjusted EBITDA fell 22% to $40 million.

Other Financial Aspects

News Corp, which carries a Zacks Rank #4 (Sell), ended the quarter with cash and cash equivalents of $1,856 million, borrowings of $187 million and shareholders' equity of 10,860 million, excluding non-controlling interest of $298 million.

Capital expenditures of $128 million were incurred in the six months of fiscal 2018 while free cash flow available to the company was $16 million.

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