News Corp's 1Q16 Earnings: Why Did Revenues Fall Again?

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News Corp's 1Q16 Earnings: Why Did Revenues Fall Again? PART 1 OF 2

News Corp’s Revenues Fall for the Third Straight Quarter

News Corp reports fiscal 1Q16 results

News Corp (NWSA) announced its fiscal 1Q16 earnings on November 5, 2015. The company recorded fiscal 1Q16 revenues of $2.0 billion, a fall of 4% from its fiscal 1Q15 revenues of $2.1 billion. The company’s revenues fell short of consensus Wall Street analysts’ expectations for revenues of $2.1 billion in fiscal 1Q16. News Corp’s revenues fell for the third straight quarter.

News Corp’s total revenues in fiscal 1Q16 were adversely affected by $188 million due to foreign currency exchange rate fluctuations. The company’s total revenues in fiscal 1Q16 include revenues of $85 million from the company’s acquisition of Move in November last year.

As the chart below indicates, the company had total EBITDA in fiscal 1Q16 of $165 million or $0.17 billion, a decrease of 15% from the corresponding quarter last year. News Corp had income from continuing operations of $143 million, a rise of 31% over the same quarter last year. The reason for the increase in income from continuing operations was because the company had a tax benefit since, in fiscal 1Q16, News Corp decided to sell its digital education business.

As a result, News Corp has reported the earnings from this business as discontinued operations in fiscal 1Q16.

News Corp&#8217;s Revenues Fall for the Third Straight Quarter

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EPS and free cash flow

The company declared an EPS (earnings per share) from continuing operations of $0.22 in fiscal 1Q16. Adjusted EPS were $0.05 in fiscal 1Q16, versus $0.13 in fiscal 1Q15.

News Corp had a free cash flow of $67 million in fiscal 1Q16 compared to $130 million in fiscal 1Q15. The reason for the decline was lower capex (capital expenditure), the absence of restructuring payments that had been present in fiscal 1Q15, and the absence of a special dividend. The special dividend related to a cost method investment of $17 million in fiscal 1Q15.

Significant event

On November 2, 2015, REA Group, an Australian subsidiary of News Corp, announced the proposed acquisition of iProperty for $350 million. REA Group might buy iProperty shares at $2.90 per share, or it might give shareholders another option of selling their shares at $0.86 per share in cash and 0.7 shares in the newly formed company. REA Group operates property sites in Australia, the United States, China, and Europe. iProperty is a prominent online property portal in Southeast Asia.

News Corp makes up 0.18% of the Guggenheim S&P 500 Equal Weight ETF (RSP). This ETF also invests 0.24% of its portfolio in Microsoft (MSFT), 0.23% in Amazon (AMZN), and 0.23% in Activision Blizzard (ATVI).


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