News Corporation share price flies 6% higher on  FY22 earnings surge

It's been a good year for the global media giant.

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Key points

  • The News Corp share price is up 6% this morning on strong revenue and net income growth in the company's FY22 results
  • The company's real estate advertising and financial news segments powered the growth
  • News Corp says its future focus will be on cost control

The News Corporation (ASX: NWS) share price opened 6% higher today after posting big jumps across the company's top line and bottom line for FY22. 

News Corp shares are going for $25.755 apiece at the time of writing, 6.12% higher than yesterday's closing price of $24.27 a share.

Let's check the media giant's full-year results

What did News Corp report? 

The ASX-listed news media publishing company pulled in total revenue of $10.39 billion, an 11% increase on FY21. Excluding one-off items like acquisitions, divestitures, and foreign currency impact, revenue rose by 8%. 

A stellar performance in News Corp's digital real estate services (REA Group and and financial news (Wall Street Journal and Barrons) segments were the key driving forces, posting increases in revenue of 25% and 18% respectively. 

The above segments offset a 2% fall in subscription video revenue. This was primarily due to a substantial dip in residential broadcast subscribers and Foxtel Now subscribers. 

On a segment level, total earnings before interest, tax, depreciation, and amortisation (EBITDA) came in at $1.67 billion, a 31% lift on FY21. 

The same divisions spearheaded the surge in EBITDA. Digital real estate services and the financial news segments experienced improvements of 12% and 30% in EBITDA respectively. 

However, subscription video services fell flat in terms of EBITDA. 

Overall, News Corp's net income for FY22 was $760 million, beating last year's figure of $389 million by 95%. 

Management buoyed by results

There was much positive commentary about News Corp's results for the year. However, I would treat the following comments with a degree of scepticism. 

News Corp CEO Robert Thomson said:

Foxtel's renaissance continued, as streaming revenues from Kayo and BINGE offset broadcast declines during the year. While down slightly for the year due to currency fluctuations, both revenue and profitability were markedly higher on an adjusted basis.

Foxtel Now total subscribers and paid subscribers both dropped by 27,000 and 25,000 respectively. In the future, closer attention should be paid to these numbers. 

In addition, whilst Kayo and BINGE have recorded solid growth in subscribers, the battle for streaming eyeballs continues to heat up. 

The fall in Netflix (NASDAQ: NFLX) subscribers this year could be a telltale sign of the challenges facing streaming service providers. 

What's next for News Corp? 

As reported in the Australian Financial Review, News Corp Chief Financial Officer Susan Panuccio advised investors the company would continue to work on cost control in light of supply chain and inflation pressures.

These comments were directed at the potential adverse impact on advertising revenue. Panuccio said: 

We will take necessary action to address those pressures including pricing adjustments, together with our ongoing focus on cost management. Visibility on advertising remains limited across the businesses and we continue to expect foreign exchange headwinds given the current spot rates for the Australian dollar and pound sterling compared to the prior year.

The clouded outlook for advertising makes it challenging to forecast future revenue. This is probably one reason for News Corp's historically cyclical results. 

My thoughts on the News Corp share price

The News Corp share price has dropped 21% in the last 12 months, far underperforming the S&P/ASX 200 Index (ASX: XJO). Across the same period, the ASX 200 has declined by 6%. 

News Corp has been a benefactor of the digital media tailwind as people move away from physical news publications. As a result, gross margins have steadily risen in the last decade. 

However, margin and cost improvements can only take a company so far. Great companies often find ways to generate consistent and sustainable top and bottom line growth.

In News Corp's case, advertising revenue is primarily dictated by macroeconomic forces. When times are good, businesses have more to spend on advertising but this quickly gets flipped when times are bad. 

These are some of the factors to consider when assessing the long-term outlook of News Corp. 

Motley Fool contributor Raymond Jang has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Netflix. The Motley Fool Australia has recommended Netflix. 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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