Global media and publishing company News Corp (NASDAQ:NWSA) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 3.1% year on year to $2.58 billion. Its non-GAAP profit of $0.21 per share was 24% above analysts’ consensus estimates.
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News Corp (NWSA) Q3 CY2024 Highlights:
- Revenue: $2.58 billion vs analyst estimates of $2.58 billion (in line)
- Adjusted EPS: $0.21 vs analyst estimates of $0.17 ($0.04 beat)
- EBITDA: $410 million vs analyst estimates of $399.3 million (2.7% beat)
- Gross Margin (GAAP): 51%, up from 49.1% in the same quarter last year
- Operating Margin: 16.1%, up from 7.7% in the same quarter last year
- EBITDA Margin: 15.9%, up from 14.6% in the same quarter last year
- Free Cash Flow was -$31 million compared to -$179 million in the same quarter last year
- Market Capitalization: $16.85 billion
Company Overview
Established in 2013 after a restructuring, News Corp (NASDAQ:NWSA) is a multinational conglomerate known for its news publishing, broadcasting, digital media, and book publishing.
Media
The advent of the internet changed how shows, films, music, and overall information flow. As a result, many media companies now face secular headwinds as attention shifts online. Some have made concerted efforts to adapt by introducing digital subscriptions, podcasts, and streaming platforms. Time will tell if their strategies succeed and which companies will emerge as the long-term winners.
Sales Growth
Examining a company’s long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. News Corp struggled to generate demand over the last five years as its sales were flat. This is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Just like its five-year trend, News Corp’s revenue over the last two years was flat, suggesting it is in a slump. 
News Corp also breaks out the revenue for its three most important segments: Dow Jones, News Media, and Book Publishing, which are 21.4%, 20.2%, and 21.2% of revenue. Over the last two years, News Corp’s Dow Jones revenue (media subsidiary) averaged 4.2% year-on-year growth. On the other hand, its News Media revenue (general media) averaged 0.2% declines while its News Media revenue (general media) was flat.
This quarter, News Corp grew its revenue by 3.1% year on year, and its $2.58 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 3.9% over the next 12 months, an improvement versus the last two years. Although this projection indicates the market believes its newer products and services will fuel better performance, it is still below the sector average.
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Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
News Corp has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 6%, subpar for a consumer discretionary business.
News Corp burned through $31 million of cash in Q3, equivalent to a negative 1.2% margin. The company’s cash burn slowed from $179 million of lost cash in the same quarter last year . These numbers deviate from its longer-term margin, raising some eyebrows.
Key Takeaways from News Corp’s Q3 Results
We liked that News Corp beat analysts’ EPS expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its Book Publishing revenue missed. Overall, this quarter was mixed. The stock remained flat at $29.16 immediately following the results.
Is News Corp an attractive investment opportunity at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.