News Corporation (NWSA) Misses on Q3 Earnings & Revenues - Analyst Blog

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Rupert Murdoch-controlled News CorporationNWSA reported lower-than-expected results for the third quarter of fiscal 2015. Foreign currency headwinds and soft advertising demand weighed upon the company's performance in the quarter. However, increased revenues at its Book Publishing division and expanded digital offerings, with greater emphasis on real estate businesses, provided some cushion.

The company recorded adjusted earnings of 5 cents a share that missed the Zacks Consensus Estimate of 7 cents and declined substantially from 11 cents earned in the year-ago quarter. Higher effective tax rate and a fall in interest income led to the decline in earnings per share. Including one-time items, the publisher of The Wall Street Journal and New York Post, reported quarterly earnings of 4 cents a share that decreased from 8 cents posted in the year-ago period.

News Corporation is in a transitional phase, looking to diversify its revenue streams along with expanding its digital properties via product launches and accretive acquisitions. The company acquired Storyful, thus taking a step in the direction of enhancing its online video offerings. It also completed the buyout of Harlequin Enterprises Limited from Torstar Corporation. Harlequin, which is part of HarperCollins Publishers, is a leading publisher of women's fiction. Thus, its acquisition will help in augmenting News Corporation's presence, primarily in Europe and the Asia-Pacific.

News Corporation, which has a 61.6% stake in the digital real estate services company, REA, stated that the latter has acquired a 17.2% 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. Also, News Corporation acquired Move, one of the leading providers of online real estate services.

The company also acquired BigDecisions.Com, the provider of financial decision-making tools, and invested in PropTiger.com by acquiring a 25% stake in Elara Technologies Pte Ltd, the parent company of this leading Indian digital real estate website. Further, News Corporation acquired VCCircle Network and increased its stake in APN News and Media Limited, an Australian media company, to 14.99%.

News Corporation, which split from Twenty-First Century Fox, Inc. FOXA , stated that its total revenue for the reported quarter was $2,062 million, down 1% from the year-ago quarter. The figure also fell short of the Zacks Consensus Estimate of $2,122 million.

Total advertising revenues of this Zacks Rank #3 (Hold) stock dropped 5% year over year to $904 million, while circulation and subscription revenues declined 2% to $650 million. Consumer revenues increased 13% to $385 million.

Segmental Performance

Revenues from the News and Information Services segment fell 9% year over year to $1,353 million, primarily due to a 12% decline in advertising revenues. Advertising revenues dropped due to the adverse impact of foreign currency fluctuations, softness in the print advertising market and a fall in revenues at News America Marketing. Circulation and subscription revenues tumbled 6% during the quarter. Adjusted segment EBITDA plunged 21% to $116 million.

The Book Publishing segment, which consists of HarperCollins Publishers, reported revenues of $402 million, up 14% from the prior-year period, reflecting robust performance in General Books, coupled with the results from the addition of Harlequin. These were partially offset by lower revenues from the Divergent series. On the other hand, e-book sales fell 3%, contributing 22% to consumer revenues.

Adjusted EBITDA for News Corporation's book publishing business, which offers e-books for devices sold by Amazon.com Inc. AMZN and Apple Inc. AAPL , came in at $49 million, down 8% year over year.

The Cable Network Programming segment's revenues came in at $116 million, up 3% from the year-ago quarter. This improvement is attributable to an increase in affiliate pricing and advertising revenues, partly offset by foreign currency headwinds. Adjusted EBITDA was $31 million, up 15% year over year.

Revenues at the Digital Real Estate Services segment soared 67% year over year to $170 million on the back of the acquisition of Move and increased pricing at the REA Group, whereas adjusted EBITDA increased 7% to $58 million.

Revenues at the Digital Education division remained flat year over year at $21 million, whereas adjusted EBITDA was a loss of $21 million versus a loss of $45 million in the prior-year period.

Other Financial Aspects

News Corporation ended the quarter with cash and cash equivalents of $2,027 million, an amount due from Twenty-First Century Fox worth $52 million, and shareholders' equity of $12,369 million, excluding non-controlling interest of $157 million.

Capital expenditures during the first nine months of fiscal 2015 were $268 million, while the company generated free cash flow of $391 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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