What To Expect From News Corp Stock After Fiscal Q4 Results?

NWSA: News logo

News Corp (NASDAQ: NWSA), a global, diversified media and information services company, is scheduled to report its fiscal fourth-quarter results on Thursday, August 5. We expect NWSA to likely beat the revenue and earnings expectations, driven by the positive momentum of Digital Real Estate Services, Book Publishing, and Dow Jones. Collectively, these segments generated EBITDA growth of close to 55% of the total company in fiscal Q3. At Dow Jones, overall advertising, which was slightly down in Q2, moved into positive terrain in Q3, with digital advertising 30% higher in the quarter, almost double the growth rate of the New York Times. Digital now represents 61% of all advertising compared to a ratio of 48% in the prior year. Going forward, we expect the company to benefit from the growth momentum and show sequentially improving sales and profit trends in all three segments (except News Media) in the upcoming Q4 as well.

Our forecast indicates that NWSA’s valuation is $27 per share, which is 10% higher than the current market price of $25. Look at our interactive dashboard analysis on NWSA’s pre-earnings: What To Expect in Q4? for more details.

(1) Revenues to be slightly ahead of consensus estimates

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Trefis estimates NWSA’s Q4 2021 revenues to be around $2.3 Bil, 5% ahead of the consensus estimate of $2.2 Bil. The company reported Q3 fiscal 2021 total revenues of $2.34 billion, 3% higher year-over-year, while total segment EBITDA was $298 million, up 23% y-o-y, reflecting an 8% positive impact from foreign currency fluctuations as well as growth in the Digital Real Estate Services, Book Publishing, and Dow Jones segments. However, it should be noted that the company saw lower revenues in the News Media segment, primarily driven by a negative impact of $199 million (9%) from the divestiture of News America Marketing as well as weakness in the print advertising market. Moreover, negative impacts worth $28 million triggered by the closure or digital transitioning of certain regional and community newspapers in Australia, also put pressure on the top line.

News Corp was on an acquisition spree in late March, bringing Investor’s Business Daily (IBD, which operates the Investors.com website) and the Books and Media segment of HMH (Houghton Mifflin Harcourt) into the fold. The profitable, high margin and rapidly growing digital-first financial news business of IBD will expand Dow Jones’ offering. In fact, IBD’s revenue base is almost entirely digital, representing nearly 100,000 digital subscribers across its platforms, with little overlap to Dow Jones’s existing subscriber base. It should be noted that Dow Jones is home to The Wall Street Journal, MarketWatch, and Barron’s, among other publications, products, and news sites.

2) EPS expected to be well ahead of consensus estimates

NWSA’s Q4 2021 earnings per share (EPS) is expected to be $0.04 per Trefis analysis, ahead of the consensus estimate of $0.03. In the fiscal Q3, net income was $96 million compared to a net loss of $1 billion in the prior year, which included non-cash impairment charges of $1.1 billion. During this period, NWSA reported diluted earnings per share of $0.13, as compared to -$1.24 in the prior year. Looking ahead, cost declines are expected to moderate from the first half, as the company plans to lap some Covid-19 saving initiatives and see closure or digital transition of some of its newspapers in Australia in Q4.

For the full year, we expect NWSA’s net margin to grow to reach 3.4% in fiscal 2021. This coupled with a marginal fall in revenues, could lead to a rise in net income to $0.3 billion in fiscal 2021. All this, resulting in a possible EPS increase from a loss of $2.16 in fiscal 2020 to $0.52 in fiscal 2021.

(3) Stock price estimate higher than the current market price

Going by our NWSA valuation, with an EPS estimate of 52 cents and P/E multiple of around 52x in fiscal 2021, this translates into a price of $27, which is 10% higher than the current market price of roughly $24.

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