Earnings Beat In The Cards For News Corp’s Stock?

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News Corp (NASDAQ: NWSA), a global, diversified media and information services company, is scheduled to report its fiscal second-quarter results on Thursday, February 3. 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. NWSA beat on both top and bottom lines in its fiscal first-quarter earnings. It saw revenues grow 18% year-over-year (y-o-y) to $2.5 billion while its profitability rose 53% y-o-y to 33 cents –  driven by significant revenue expansion and strong EBITDA growth in all operating segments. We expect this momentum to continue in fiscal Q2 as well.

Our forecast indicates that NWSA’s valuation is $31 per share, which is 39% higher than the current market price. Look at our interactive dashboard analysis on NWSA Earnings Preview: 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 Q2 2022 revenues to be around $2.7 Bil, slightly ahead of the consensus estimate of $2.6 Bil. The company’s revenues in the fiscal first quarter were marked by higher revenue growth across all its key segments, notable in Digital Real Estate (REA and Move). Looking ahead, the company expects to continue to reinvest in Move as it plans to drive its core business and expand into relevant adjacencies. In addition, NWSA’s total segment EBITDA was $410 million in Q1, up 53% versus the prior year, the highest quarterly growth rate since 2017 despite the challenges from the lockdowns in Australia and compared against 21% total segment EBITDA growth in the prior year. Overall, we expect NWSA’s Revenues to grow 9% y-o-y to $2 billion in FY 2022.

The company announced a $1 billion stock repurchase program, which began after the company’s first-quarter earnings call in November. This latest authorization allows the company to repurchase a combination of class A and class B common stock in the open market or otherwise from time to time with no time limit and may be modified, suspended, or discontinued at any time. This stock repurchase program followed the termination of a stockholder rights agreement which was approved by the board in May 2013. Also, this comes on the heels of the company’s most profitable year since the launch of the new News Corp in 2013. That said, NWSA’s CEO is striking a bullish tone for the business potential, and the announcement of a large buyback program has enthused investors.

2) EPS expected to be well ahead of consensus estimates

NWSA’s Q2 2022 earnings per share (EPS) is expected to be $0.35 per Trefis analysis, ahead of the consensus estimate of $0.31. The rate of cost increase year-on-year in the first quarter was exacerbated by the Covid-19 savings initiatives in the prior year across headcount and marketing. The company expects more moderate year-over-year cost increases for the balance of the year.

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

Going by our NWSA’s Valuation, with a revenue per share (RPS) estimate of around $12.70 and a P/S multiple of around 2.4x in fiscal 2022, this translates into a price of almost $31, which is 39% ahead of the current market price.

It is helpful to see how its peers stack up. NWSA Peers shows how News Corp compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since 2016.

Returns Feb 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 NWSA Return 0% 0% -100%
 S&P 500 Return 0% -5% 102%
 Trefis MS Portfolio Return -4% -13% 241%

[1] Month-to-date and year-to-date as of 2/1/2022
[2] Cumulative total returns since the end of 2016

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