Business Strategy & Outlook
News Corp operates in an industry undergoing significant changes, with the traditional print-based publishing business model being dismantled by proliferating news and information outlets in the digital space. This is compounded by ever improving means for consumers to access them, driven by mobility and continuing device innovation. Consequently, News Corporation faces enormous structural headwinds, with consumers migrating from newspapers to the digital arena and advertisers following suit. Having said that, News Corporation is better placed than peers in the publishing space to transition its print business to the digital age. It has some of the most venerable masthead brands in the industry (The Wall Street Journal, The Times), and boasts significant editorial resources, especially compared with those of its rivals, which have been dwindling. The company’s financial position is solid, having split in 2013 from Twenty-First Century Fox, with no debt on the balance sheet. Even with the recent consolidation of Foxtel’s debt and a string of acquisitions, News boasts sufficient financial strength to transition the business to the digital age while also exploring opportunities to diversify away from the traditional newspaper business. Recent efforts to simplify the group are also positive, while a USD 1 billion buyback was announced in August 2021.
While News Corporation deals with the structural challenges facing its publishing business, the company was partly shielded by its Australian pay-television operations in 65%-owned Fox Sports and Foxtel. Unfortunately, these two businesses are also coming under severe pressure from digital streaming alternatives to pay TV. On the positive side, the 61%-owned REA Group’s growth outlook remains robust in the online real estate classifieds space and the Move (acquired in November 2014) is making strong progress in the U.S. digital property
Financial Strengths
News Corporation is in solid financial health. It currently has a net debt position of just USD 1.2 billion, or 0.7 times EBITDA. Furthermore, the legacy newspaper publishing business is still generating solid free cash flow, albeit at a declining rate, augmented by resilient earnings from REA Group. Consequently, the company is well placed financially as it attempts to transition the publishing business model to the digital age, while also exploring opportunities to diversify away from it. In November 2021, management began a share buyback. Even after closing several acquisitions in 2022, News can repurchase up to USD 1 billion worth of shares and still keep net debt/EBITDA below 1.5. However, the last time News instituted a buyback in 2013 due to a “lazy” balance sheet, it only repurchased 14% of the USD 500 million program, even though the stock price was much lower during that time.
Bulls Say
Company Description
News Corporation is a diversified media conglomerate with a large presence in the U.S, the U.K., and Australia. Key brands include The Wall Street Journal, Herald Sun, and The Times. The company also has a strong presence in the Australian pay-TV market through Fox Sports and Foxtel (both 65%- owned), while its 62%-owned REA Group is the dominant real estate classified business in Australia. In addition, it owns HarperCollins, one of the largest book publishers globally, and also has a substantial digital property advertising business (Move) in the U.S.
(Source: Morningstar)
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