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News Corp share price lower after US$142 million half year loss

The News Corp (ASX: NWS) share price has edged lower on Friday following the release of its second quarter and half year update.

At the time of writing the media company’s shares are down slightly to $21.14.

How did News Corp perform in the second quarter?

During the second quarter News Corp reported a 6% decline in revenue to US$2,479 million and a 4% reduction in EBITDA to US$355 million.

The main drags on its performance during the quarter were its Subscription Video Services and Book Publishing businesses. They reported 11% declines in revenue and 17% and 28% declines, respectively, in segment EBITDA.

In respect to the former, Foxtel’s total closing subscribers at the end of December were 2.952 million, an increase of 3% compared to the prior year. This was primarily due to subscriber growth at Kayo, partially offset by lower broadcast subscribers.

The company’s key News and Information Services business had a stronger quarter. It reported a 1% decline in revenue to US$1,241 million during the second quarter and a 27% increase in EBITDA to US$142 million.

This was due partly to the one-time US$22 million benefit from the settlement of certain warranty related claims. Though, it also reflects a higher contribution from Dow Jones and from News UK thanks to cost savings. These helped offset lower revenues at News Corp Australia and News America Marketing.

Finally, the Digital Real Estate Services business, which includes its interest in REA Group Limited (ASX: REA), reported a 5% decline in revenue and a 2% decline in EBITDA.

This ultimately led to News Corp posting a 6% decline in revenue to US$4,819 million and a 21% reduction in EBITDA to US$576 million for the first half of FY 2020. On the bottom line it posted a net loss of US$142 million for the half. This follows its first quarter non-cash impairment charges of US$273 million.

How does this compare to the market’s expectations?

According to a note out of Goldman Sachs, it was expecting a 5% decline in revenue to US$4.9 billion and a 22% reduction in EBITDA to US$573 million.

Which means News Corp has fallen a touch short of its estimates if you remove the one-off EBITDA benefit. 

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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