News Corporation (NWSA) Stock Analysis

News Corporation (NWSA) Stock Analysis

Sector: Communication Services
Industry: Publishing & Broadcasting
Analysis Date: February 18, 2025

1. Company Overview

News Corporation (NASDAQ: NWSA) is a diversified media and information services company with operations spanning news and publishing, digital real estate services, book publishing, and cable network programming. Formed after the split of the original News Corp in 2013, the company’s well-known assets include The Wall Street Journal, Dow Jones, News UK, News Corp Australia, Realtor.com, HarperCollins Publishers, and cable channel Fox Sports Australia.

Key Business Segments:

·         News & Information Services:

    • Newspapers & Digital Media: Includes The Wall Street Journal, The Times (UK), The Sun (UK), and various other global news publications.
    • Dow Jones: Provides business news, research tools, and financial data, primarily through The Wall Street Journal and Factiva.

·         Digital Real Estate Services:

    • Realtor.com, REA Group: Online real estate listing platforms in the U.S. and Australia, driving advertising and subscription revenues.

·         Book Publishing:

    • HarperCollins: One of the world’s largest English-language book publishers, offering both print and digital titles.

·         Cable Network Programming (Foxtel):

    • Subscription TV & Streaming Services: Operations in Australia providing sports, entertainment, and news content.

Strategic Initiatives:

  • Digital Transformation: Shifting traditional publishing toward digital subscriptions, e-commerce integrations, and data-driven advertising solutions.
  • Growth in Real Estate Platforms: Capitalizing on strong online real estate demand, particularly via REA Group in Australia and Realtor.com in the U.S.
  • Cost & Operational Efficiencies: Continuing cost reductions, restructuring, and portfolio optimization to enhance profitability.
  • Global Brand Strength: Leveraging marquee brands (WSJ, HarperCollins) to expand digital offerings and subscription-based models.

2. Financial Performance

a. Revenue & Growth

  • TTM Revenue: $10.25 Billion
  • YoY Revenue Growth (TTM): +13.34%

Analysis:
News Corp’s revenue rebounded with a 13% increase, reflecting improvements in digital advertising, real estate listings, and post-pandemic advertising demand. However, structural pressures in print media remain a challenge for traditional segments.

b. Profitability

  • Net Income (TTM): $414 Million
  • EPS (TTM): $0.72
  • Profit Margin: 4.04%
  • Return on Equity (ROE): 6.19%

Analysis:
While net income remains modest relative to total revenue, News Corp has turned a consistent profit. A ROE of around 6% suggests moderate profitability, reflecting the challenges of transitioning from traditional print to digital models.

c. Margins

  • Gross Margin: 51.55%
  • Operating Margin: 8.80%
  • EBITDA Margin: 13.17%

Analysis:
Gross margin over 50% highlights the relatively high-value nature of digital real estate listings and subscription-based news. Operating margin remains below 10%, as the company balances restructuring costs and ongoing investments in digital transformation.

d. Cash Flow

  • Operating Cash Flow (TTM): $1.16 Billion
  • Capital Expenditures (TTM): -$499 Million
  • Free Cash Flow (TTM): $663 Million
  • FCF Margin: 6.47%

Analysis:
News Corp’s free cash flow generation is healthy at around $663 million, supporting dividends and strategic acquisitions. The FCF margin of 6.47% indicates moderate efficiency in converting revenue into cash, aided by subscription and digital real estate services.

3. Balance Sheet & Liquidity

  • Cash & Equivalents: $1.76 Billion
  • Total Debt: $2.92 Billion
  • Net Cash Position: -$1.16 Billion (approximately -$2.05 per share)
  • Current Ratio: 1.73
  • Debt-to-Equity Ratio: 0.32

Analysis:
Though News Corp carries net debt of about $1.16 billion, its current ratio near 1.7 suggests adequate short-term liquidity. The debt-to-equity ratio of 0.32 is moderate, providing room for potential future investments or acquisitions without excessively leveraging the balance sheet.

4. Valuation

  • PE Ratio (TTM): 40.34
  • Forward PE: 30.98
  • PS Ratio: 1.68
  • P/FCF Ratio: 25.85
  • PEG Ratio: 1.57

Analysis:
A trailing PE above 40 suggests that the market is pricing in expectations of continued digital and real estate growth. The forward PE near 31 indicates the stock may be somewhat expensive relative to near-term earnings expectations. However, the P/FCF of about 26 is more moderate, reflecting confidence in stable cash flow generation.

5. Market Performance

  • 52-Week Range: $22.65 – $30.25
  • 52-Week Price Change: +17.28%
  • Beta (5Y): 1.36
  • Average Volume (20 Days): ~2.91 Million shares
  • Short Interest: 5.96 Million shares (1.05% of outstanding)

Analysis:
The stock has climbed about 17% over the last year, outpacing some industry peers. A beta above 1.3 indicates higher volatility relative to the broader market, though short interest remains low, suggesting limited bearish pressure.

6. Dividend & Shareholder Returns

  • Annual Dividend Per Share: $0.20 (TTM)
  • Dividend Yield: 0.66%
  • Payout Ratio: 27.61%
  • Buyback Yield: 0.57%
  • Shareholder Yield: 1.23%

Analysis:
News Corp’s modest dividend yield of 0.66% reflects a relatively low payout ratio, leaving room for reinvestment and potential dividend growth. The company also engages in share repurchases, though at a modest scale.

7. Conclusion

Pros:

  • Solid Free Cash Flow: $663 million in free cash flow supports dividends, share buybacks, and digital expansion.
  • Diversified Portfolio: Exposure to digital real estate (Realtor.com, REA Group), book publishing (HarperCollins), and global news assets helps mitigate industry-specific risks.
  • Improving Revenue Trends: A 13% revenue rebound indicates success in digital transformation and economic recovery tailwinds.

Cons:

  • Moderate Profitability: Profit margins (4% net, ~9% operating) remain modest, reflecting restructuring costs and competitive pressures.
  • Ongoing Transition Challenges: Shifts from print to digital and changing consumer behaviors in news media continue to pressure legacy operations.
  • High Valuation Metrics: A trailing PE over 40 and forward PE near 31 suggest a premium valuation, requiring continued growth execution to justify.
  • Regulatory & Market Risks: Media sector faces content regulation, platform competition, and cyclical advertising demand.

Final Note:
News Corporation’s steady pivot to digital platforms and subscription-based models, combined with its robust real estate listings business, positions it for moderate growth and stable free cash flow. While valuations appear elevated, the company’s diversified assets, improving digital revenues, and disciplined cost management support its transition away from traditional media. Investors should weigh the potential for ongoing digital transformation success against the structural headwinds still facing parts of the publishing sector.

Disclaimer:
This analysis is for informational purposes only and does not constitute investment advice. Investing involves risks, including potential loss of principal. Past performance is not indicative of future results. Please consult a qualified financial advisor before making any investment decisions.

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