News Corp. (NWSA) Misses on Q1 Earnings and Revenues

Rupert Murdoch-controlled News CorporationNWSA commenced first-quarter fiscal 2016 on a soft note. Foreign currency headwinds and soft advertising demand weighed upon the company's performance in the quarter. However, expanded digital offerings, along with greater emphasis on real estate businesses and marginally higher revenues at its Book Publishing division, provided some cushion to the stock.

The company recorded adjusted earnings of 5 cents a share that missed the Zacks Consensus Estimate of 7 cents and declined substantially from 13 cents earned in the year-ago quarter. Including one-time items and discontinued operations, the publisher of The Wall Street Journal and New York Post reported quarterly earnings of 30 cents a share that increased significantly from 11 cents posted in the year-ago period.

News Corporation, which split from Twenty-First Century Fox, Inc. FOXA , stated that its total revenue for the reported quarter was $2,014 million, down 4.5% from the year-ago quarter. The figure also fell short of the Zacks Consensus Estimate of $2,111 million, thus marking the third straight quarter of revenue miss. The top line incorporates revenues of $85 million from Move, Inc. acquired in November last year. However, adverse foreign currency fluctuations hurt total revenue by $188 million.

Adjusted revenues (excluding the impact of acquisitions and foreign currency fluctuations) dipped 1% year over year to $2,091 million.

Total advertising revenues declined 4.3% year over year to $880 million, while circulation and subscription revenues dropped 4.9% to $639 million. Consumer revenues inched up 0.5% to $392 million.

News Corporation, which holds a Zacks Rank #2 (Buy), is in a transitional phase, looking to diversify its revenue streams, along with expanding its digital properties via product launches and accretive acquisitions.

News Corporation, which has a 61.6% stake in the digital real estate services company, REA, recently announced that it intends to acquire the remaining stake in iProperty Group Limited, which has online property advertising operations in Malaysia, Indonesia, Hong Kong, Macau and Singapore, along with investments in the Philippines and India.

The company also recently acquired video advertisement technology company, Unruly Holdings Ltd. The buyout of Unruly offers News Corporation significant opportunity to expand in the online video advertising market by using its skills in identifying the social and viral penetration of advertisements.

News Corporation, which offers e-books for devices sold by Inc. AMZN and Apple Inc. AAPL , had earlier raised its stake in APN News and Media Limited, an Australian media company, to 14.99%; acquired BigDecisions.Com, the provider of financial decision-making tools; and invested in, to tap the burgeoning residential real estate market in India.

Segmental Performance

Revenues from the News and Information Services segment fell 11% year over year to $1,290 million, primarily due to a 13% decline in advertising revenues and a 6% decrease in circulation and subscription revenues. The segment's results were hurt by the adverse impact of foreign currency fluctuations, softness in the print advertising market, primarily in Australia, and a fall in revenues at News America Marketing. Adjusted segment EBITDA declined 15% to $89 million.

The Book Publishing segment, which consists of HarperCollins Publishers, reported revenues of $409 million, up 1% from the prior-year period, reflecting robust sales in General Books and results from the addition of Harlequin acquired in Aug 2014. These were partly offset by a fall in revenues from the Divergent series, decline in e-book sales and adverse foreign currency fluctuations. Digital sales constituted 20% of consumer revenues. Adjusted EBITDA for News Corporation's book publishing business came in at $40 million, down 33% year over year.

Revenues at the Digital Real Estate Services segment soared 71% year over year to $191 million on the back of the acquisition of Move, whereas adjusted EBITDA increased 31% to $77 million.

The Cable Network Programming segment's revenues came in at $124 million, down 11% from the year-ago quarter. Management highlighted that foreign currency headwinds hurt revenues by $29 million. Adjusted EBITDA was $35 million, up 9% year over year.

Other Financial Aspects

News Corporation ended the quarter with cash and cash equivalents of $1,898 million, amount of $60 million due from Twenty-First Century Fox, and shareholders' equity of $11,616 million, excluding non-controlling interest of $165 million.

Capital expenditures of $63 million were incurred during the quarter, while the company generated free cash flow of $67 million.

During the quarter, the company paid dividends of $16 million and bought back shares worth $15 million.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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