News Corp Earnings Preview: What Are We Watching?
News Corp (NASDAQ:NWSA) is scheduled to announce its second quarter fiscal 2017 results on Thursday, February 9. The company saw mixed results in the fiscal first quarter, with revenues making a surprising gain and beat, but profits missing on a per-share basis. Q1 revenues decreased 2% year-over-year (y-o-y) to $2 billion, primarily due to the impact of foreign currency fluctuations. The company witnessed soft print advertising market and continued weakness in the British Pound. As a result, News Corp’s revenue declined in the News and Information Service (-5%) segment and the Book Publishing segment (-5%). However, the Digital Real Estate (18%) segment posted strong growth on the back of higher revenues at both REA Group and Move. We expect this trend to continue in the near term, and accordingly expect the company to post lower overall sales during the second quarter.
We expect continued revenue headwinds, especially in News and Information Services, to weigh on the upcoming results. However, Digital Advertising and Digital Real Estate revenues could be a bright spot for the company. In terms of the bottom line, we expect News Corp to continue focusing on fiscal discipline and maintaining strict control over its operating expenses to grow its margins. Reuters’ compiled analyst estimates forecast revenues of $2.1 billion and earnings per share of $0.18 in Q2 2017.
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In the upcoming Q2 results, News Corp expects continued revenue and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) growth for the Digital Real Estate segment. Realtor is expected to roll out Showcase 2.0 later in the second quarter, and the revenue boost is expected to be more second-half weighted, reflecting the timing of contract renewals. The company expects strong improvement in its EBITDA contributions from Realtor this year. For the Book Publishing segment, the company expects to see EBITDA improvements in the remainder of the year, largely driven by growth in digital revenue at HarperCollins. News Corp’s Fox Sports Australia could benefit from lower rights costs in the second quarter and could witness an improvement in EBITDA versus the prior year.
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