With The Stock Flat This Year, Will Q3 Results Drive News Corp’s Stock Higher?

-6.64%
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Trefis
NWSA: News logo
NWSA
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[Note: News Corp Fiscal Year Ends in June]

News Corp stock (NASDAQ: NWSA), a global, diversified media and information services company, is scheduled to report its third-quarter results on Wednesday, May 8. We expect NWSA’s stock to see little to no movement with revenues and earnings matching expectations in its third-quarter results. The traditional publishing industry is facing disruption due to digital news and information outlets. Going forward, NWSA expects higher costs due to the supply chain and inflationary pressures. Advertising conditions and visibility remain limited across businesses. Looking at each of the segments, At Move, the company expects improvements in lead volumes, with January up 1% year-over-year (y-o-y). At Dow Jones, the segment is expected to benefit from stronger growth in B2B revenues with continued improvement in ongoing advertising declines. At News Media, inflationary cost pressures, especially on newsprint prices, are expected to be balanced by targeted cost initiatives. In Subscription Video Services, the company continues to expect modestly higher expenses for the full year. Fewer new releases across entertainment due to the writers and actors strike, and a weaker summer sports schedule has created some softness in streaming revenues, which may impact full year profitability in local currency.

NWSA stock has shown strong gains of 25% from levels of $20 in early January 2021 to around $25 now, vs. an increase of about 40% for the S&P 500 over this roughly 3-year period. However, the increase in NWSA stock has been far from consistent. Returns for the stock were 24% in 2021, -18% in 2022, and 35% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that NWSA underperformed the S&P in 2021.
In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Communication Services sector including GOOG, META, and NFLX, and even for the megacap stars TSLA, MSFT, and AMZN. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could NWSA face a similar situation as it did in 2021 and underperform the S&P over the next 12 months – or will it see a strong jump?

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Our forecast indicates that NWSA’s valuation is $25 per share, which is almost in line with the current market price. Look at our interactive dashboard analysis on NWSA Earnings Preview: What To Expect in Q3? for more details.

(1) Revenues to come in line with consensus estimates

Trefis estimates NWSA’s Q3 2024 revenues to be around $2.5 Bil, in line with the consensus estimate. The company’s revenues grew 3% year-over-year (y-o-y) to $2.59B, driven by broad gains across almost every segment. In operating metrics for its news business, total consumer subscriptions rose 10% to 5.43 million, and total digital-only subscriptions rose 15% to 4.75 million. At The Wall Street Journal, total subscriptions rose 7% to 4.05 million, and of that, digital-only subscriptions rose 11% to 3.53 million. For Barron’s Group, total subs rose 17% to 1.24 million while digital-only subs rose 23% to 1.1 million.

For the full year 2024, we expect NWSA Revenues grew to $10.1 billion, up 2% y-o-y.

(2) EPS is expected to match consensus estimates

NWSA’s Q3 2024 earnings per share (EPS) is expected to be 11 cents per Trefis analysis, matching the consensus estimate. In Q2, the company more than doubled its attributable net income to $183 million from a previous $94 million. Total segment earnings before interest, taxes, depreciation, and amortization rose 16 % y-o-y to $473 million. In Q2 2024, reported EPS was $0.27 as compared to $0.12 in the prior year.

(3) Stock price estimate matches current market price

Going by our NWSA’s Valuation, with an earnings per share estimate of around 72 cents and a P/E multiple of around 34.6x in fiscal 2024, this translates into a price of almost $25, which is in line with the current market price.

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

 Returns May 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 NWSA Return 3% 0% 114%
 S&P 500 Return 3% 9% 131%
 Trefis Reinforced Value Portfolio 3% 3% 632%

[1] Returns as of 5/7/2024
[2] Cumulative total returns since the end of 2016

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