Global media and publishing company News Corp (NASDAQ:NWSA) reported Q2 CY2024 results topping analysts' expectations, with revenue up 5.9% year on year to $2.58 billion. It made a non-GAAP profit of $0.17 per share, improving from its profit of $0.14 per share in the same quarter last year.
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News Corp (NWSA) Q2 CY2024 Highlights:
- Revenue: $2.58 billion vs analyst estimates of $2.50 billion (3% beat)
- EPS (non-GAAP): $0.17 vs analyst expectations of $0.17 (in line)
- Gross Margin (GAAP): 149%, up from 49.7% in the same quarter last year
- EBITDA Margin: 14.9%, in line with the same quarter last year
- Free Cash Flow of $111 million, down 75.6% from the previous quarter
- Market Capitalization: $14.99 billion
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
A company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. News Corp's demand was weak over the last five years as its sales were flat, a poor baseline for our analysis. 
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. News Corp's recent history shows its demand has stayed suppressed as its revenue has declined by 1.5% annually over the last two years.
We can dig further into the company's revenue dynamics by analyzing its three most important segments: Dow Jones, News Media, and Book Publishing, which are 22%, 21.1%, and 19.9% of revenue. Over the last two years, News Corp's Dow Jones revenue (media subsidiary) averaged 5.8% year-on-year growth while its News Media (general media) and Book Publishing (general publishing) revenues averaged declines of 4.9% and 1.7%.
This quarter, News Corp reported solid year-on-year revenue growth of 5.9%, and its $2.58 billion of revenue outperformed Wall Street's estimates by 3%. Looking ahead, Wall Street expects sales to grow 2.8% over the next 12 months, a deceleration from this quarter.
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Cash Is King
If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
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 5.3%, subpar for a consumer discretionary business.
News Corp's free cash flow clocked in at $111 million in Q2, equivalent to a 4.3% margin. The company's cash profitability regressed as it was 5.2 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren't a big deal because investment needs can be seasonal, but we'll be watching to see if the trend extrapolates into future quarters.
Over the next year, analysts predict News Corp's cash conversion will improve. Their consensus estimates imply its free cash flow margin of 5.2% for the last 12 months will increase to 8.8%, giving it more optionality.
Key Takeaways from News Corp's Q2 Results
We enjoyed seeing Alarm.com exceed analysts' billings expectations this quarter. We were also glad its revenue outperformed Wall Street's estimates. Overall, we think this was still a solid quarter with some key areas of upside. Despite this, shares traded down 2.4% to $64.04 immediately following the results.
News Corp may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.