Rupert Murdoch-controlled News Corporation (NWSA) reported better-than-expected second-quarter fiscal 2015 results, attributable to effective cost management, increased revenues at its Book Publishing division and expanded digital offerings, with greater emphasis on real estate businesses. The company recorded adjusted earnings of 26 cents a share that surpassed the Zacks Consensus Estimate by a couple of cents.
However, a higher effective tax rate and fall in interest income led to a decline in adjusted earnings per share by 16.1% year over year. Including one-time items, the publisher of The Wall Street Journal and New York Post reported quarterly earnings of 24 cents a share that dropped 7.7% from the year-ago period.
News Corporation is in a transitionary phase, looking to diversify its revenue streams and expanding its digital properties via product launches and accretive acquisitions. The company acquired Storyful, a step in the direction of enhancing online video offerings. It also completed the buyout of Harlequin Enterprises from Torstar Corporation. Harlequin, which is part of HarperCollins Publishers, is a leading publisher of women’s fiction and 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, informed that the latter has acquired a 17.2% stake in iProperty Group Ltd., having online property advertising operations in Malaysia, Indonesia, Hong Kong, Macau and Singapore with investments in the Philippines and India. Also, News Corporation acquired Move, one of the leading providers of online real estate services, for $950 million. Move now forms part of the company’s Digital Real Estate Services segment.
The company, in its latest attempt, 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.
News Corporation, which split from Twenty-First Century Fox, Inc. (FOXA) on Jun 28, 2013, said that total revenue for the reported quarter came in at $2,280 million, up 2% from the year-ago quarter, and also surpassed the Zacks Consensus Estimate of $2,237 million.
Total revenue of this Zacks Rank #3 (Hold) stock was favorably impacted by its sturdy performance across the Digital Real Estate Services and Book Publishing divisions. The addition of Harlequin also contributed to the top line. This was partially offset by a decline in advertising revenues at the News and Information Services division.
Total advertising revenues dropped 3.9% to $1,038 million, while circulation and subscription revenues declined marginally by 0.8% to $656 million. Consumer revenues increased 18.8% to $448 million.
Segmental Performance
Revenues from the News and Information Services segment fell 6% year over year to $1,523 million, primarily due to a 9% decline in advertising revenues. Advertising revenues dropped owing to the softness in the U.K. print advertising market, fall in revenues from free-standing insert products at News America Marketing and the adverse impact of foreign currency fluctuations. This was partly offset by increased advertising revenues at Dow Jones, across the Wall Street Journal franchise. Adjusted segment EBITDA plunged 12% to $225 million.
The Book Publishing segment, which consists of HarperCollins Publishers, reported revenues of $469 million, up 20% from the prior-year period, reflecting robust performance in Children’s and 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 increased 14%, contributing 17% 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 $65 million, down 4% year over year.
The Cable Network Programming segment’s revenues came in at $112 million, up 2% from the year-ago quarter. This improvement is attributable to an increase in affiliate pricing and subscriber growth, whereas adjusted EBITDA was $58 million, up 9% year over year.
Revenues at the Digital Real Estate Services segment soared 50% year over year to $154 million on the back of the acquisition of Move and increased pricing at the REA Group, whereas adjusted EBITDA surged 38% to $76 million.
Revenues at the Digital Education division remained flat at $22 million, whereas adjusted EBITDA was a loss of $24 million versus a loss of $44 million in the prior-year period. Management highlighted that increased subscription revenues at Amplify Insight and higher revenues at Amplify Access were completely offset by a fall in consulting revenues across Amplify Insight and a revenue decline at Amplify Learning.
Other Financial Aspects
News Corporation ended the quarter with cash and cash equivalents of $1,918 million, amount due from Twenty-First Century Fox of $55 million, and shareholders’ equity of $12,610 million, excluding non-controlling interest of $157 million.
Capital expenditures during the first six months of fiscal 2015 were $183 million, while the company generated free cash flow of $275 million. Management projects full-year capital expenditures to be $400 million.
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