News Corp’s Stock To Likely Trade Higher Post Q3?

[Note: News Corp Fiscal Year Ends in June]

News Corp stock (NASDAQ
NDAQ
: NWSA), a global, diversified media and information services company, is scheduled to report its third-quarter results on Thursday, May 11. We expect NWSA’s stock to trade higher due to revenues and earnings beating expectations in its third-quarter results. The traditional publishing industry is facing disruption due to digital news and information outlets, but NWSA is better positioned than its peers with well-established, respected brands and robust editorial resources and has the financial stability to weather the transition. Also, NWSA’s REA Group is poised for strong growth, and its digital property advertising business, Move, is flourishing in the U.S. It should be noted that NWSA’s pay-television operations in Fox Sports and Foxtel also provide some protection from the challenges in the publishing business, although they, too, face growing pressure from digital streaming alternatives.

That said, NWSA’s advertising conditions and visibility remain limited across businesses. It also expects ongoing foreign exchange headwinds, given the current spot rate for the Australian dollar and pounds sterling compared to the prior year. Looking at each of the segments, Australian residential new buy listings for January declined 9% as it lapped tougher prior-year comparisons at Digital Real Estate Services. At Dow Jones, the segment is expected to continue to benefit from the acquisition of Oil Price Information Service and Chemical Market Analytics. At News Media, ongoing inflationary cost pressures, especially on newsprint prices, are expected to be balanced by targeted cost initiatives.

Our forecast indicates that NWSA’s valuation is $18 per share, which is 6% higher than 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 be slightly ahead of consensus estimates

Trefis estimates NWSA’s Q3 2023 revenues to be around $2.4 Bil, slightly ahead of the consensus estimate. The second quarter saw a 7% decrease year-over-year (y-o-y) in revenue, amounting to $2.5 billion. The decrease was partly due to a 6% impact from foreign currency headwinds. At the Dow Jones segment, the professional information business saw a 45% y-o-y increase in revenue due to the acquisition of OPIS and CMA and growth in its Risk & Compliance products. The Subscription Video Services segment also saw growth, with higher streaming revenues from Foxtel’s Kayo and BINGE offsetting broadcast revenue declines. The News UK segment saw continued growth from strong digital advertising revenue at The Sun, demonstrating the successful expansion into the U.S.

(2) EPS is expected to be ahead of consensus estimates

NWSA’s Q3 2023 earnings per share is expected to be 6 cents per Trefis analysis, ahead of the consensus estimate of 5 cents. The company’s earnings per share came in at 12 cents in the second quarter of 2023 compared to 40 cents in last year’s same period. The total segment EBITDA for the quarter declined 30% y-o-y to $409 million. The EBITDA margin of 16.2% is much lower than the 21.6% achieved in the previous period, demonstrating the impact of cost inflation.

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

Going by our NWSA’s Valuation, with an earnings per share estimate of around 44 cents and a P/E multiple of around 41x in fiscal 2023, this translates into a price of almost $18, which is 6% ahead of 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.

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