Key Takeaways From News Corp’s Q4 Earnings

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News Corp (NASDAQ:NWSA) reported mixed fiscal fourth quarter results, as its earnings per share came in ahead of market expectations but revenues missed. In Q4, the company’s revenue decreased 7% year-over-year (y-o-y) to $2 billion, largely on the back of lower print advertising revenues at the News and Information Services segment, and the impact of foreign currency fluctuations. However, this decline was partially offset by continued strong performance at Digital Real Estate Services and the acquisitions of Australian Regional Media and Wireless Group.

The company’s total adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $215 million, down 40% y-o-y, primarily due to lower revenues at the News and Information Services and Book Publishing segments. The Digital Real Estate segment posted growth on the back of higher revenues at both REA Group and Move in the fourth quarter. The media company also posted adjusted earnings of 11 cents per share, up 10% y-o-y.

Digital Real Estate – The Engine Of Growth

In the fourth quarter, the total Digital Real Estate segment revenues increased 10% y-o-y to $251 million, due to continued growth at REA Group and Move. However, the segment’s EBITDA declined 50% y-0-y to $87 million, owing to a one-time gain of $122 million related to the settlement of the Zillow litigation at Move in the prior year, which more than offset the higher revenues and lower legal costs at Move.

At REA, revenues grew 7% y-o-y due to an increase in Australian residential depth revenue, benefiting from favorable product mix and higher prices. This was partially offset by the decline in revenue resulting from the sale of REA Group’s European business in December 2016. Average monthly unique users of realtor.com’s web and mobile sites for the fiscal fourth quarter grew 9% y-o-y to around 58 million.

Headwinds in News And Information Services

The News and Information Services segment witnessed a 10% y-o-y decline in its revenues in the fourth quarter. This decline in revenues was mainly due to a 12% y-o-y decrease in advertising, due to weakness in the print advertising market and lower in-store product revenues at News America Marketing. The segment’s circulation and subscription revenues decreased 9% y-o-y, due to lower print volume. Additionally, the segment’s EBITDA was reported at $103 million, down 36% y-o-y, driven by lower advertising revenues across the businesses, the timing shift at News America Marketing, partially offset by lower expenses due to volume declines and ongoing cost efficiencies. In addition, digital revenues represented 26% of the segment revenues in the quarter.

Book Publishing Declines in Q4

In Book Publishing, HarperCollins reported a 6% y-o-y decline in revenues for the fourth quarter, which was largely due to a difficult y-o-y comparison at the Children’s division. In the fourth quarter, the segment’s total digital revenues, which include audio books, accounted for approximately 20% of consumer revenues. The segment’s EBITDA declined 22% y-o-y due to lower revenues, higher employee related expenses and higher royalty costs related to some new releases.

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