News Corp (ASX: NWS) was up 4.45% at noon after posting an 11% increase in FY22 revenue to US$10.4bn and a 31% jump in earnings (EBITDA) to US$1.67bn, up from US$1.3bn in the previous year.
Without one-off items including acquisitions, divestitures, and foreign currency impact, revenue was up 8%.
The news media publishing giant attributed much of the strong revenue and net income growth in the company's FY22 result to double-digit earnings growth within its digital real estate and its financial news division.
In addition to higher digital subscriptions, and growth in digital ad revenue, the full year result also received an additional US$110m benefit from an extra week in the 2022 fiscal year.
Over the full year there was a 12% jump in earnings (EBITDA) in the real estate services division - which includes REA Group (ASX: REA) and Realtor.com in the US - to US$574m.
Earnings (EBITDA) within News Corp’s financial news division, Dow Jones - which houses The Wall Street Journal and Barrons – were also up 30% to US$433m.
News Media, the single largest contributor to the enhanced profit picture in FY22 expanded profitability to US$217m from US$52m
Net income for the full year was US$760m, a 95% increase compared to US$389m in the prior year.
4Q total revenues of US$2.67bn, up 7% on the previous period
4Q net income was US$127m, versus a net loss of -$15m in the previous year.
Total Foxtel Group subscriber count increased to 4.529m (4.413m paid)
Kayo and BINGE recorded solid growth in subscribers
Free cash flow available to News Corp in the fiscal year ended June 30, 2022, was US$663m compared to US$731m in the previous year.
The company declared a semi-annual cash dividend of $0.10 per share
News Corp CFO Susan Panuccio told investors the company would continue to work on cost control, especially in light of supply chain and inflation pressures.
Panuccio also told investors the company would take necessary action to address pressures on advertising revenue, including pricing adjustments, together with 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,” Panuccio said.
News Corp CEO Robert Thomson noted:
"Our provenance and principles endure at News Corporation but the business has been fundamentally transformed – we are vastly more profitable and have created a potent platform for even greater growth, to the benefit of all our investors and other stakeholders," he noted.
"... this spectacular result came as many other newspaper companies around the world struggled, and is a true tribute to the efforts of our executives and teams in Australia, the UK and the US."
Despite benefitting from the ongoing transition to digital media, News Corp’s share price is down -21% over the last 12 months.
Consensus on News Corp is Strong Buy.
Based on Morningstar’s fair value of $32.88 the stock appears to be undervalued.
Based on the four brokers that cover News Corp (as reported on by FN Arena) the stock is currently trading with 28.1% upside to the target price of $32.40.
Last week credit Suisse marginally adjusted News Corp earnings forecasts to reflect changes to the foreign exchange assumptions, the one-off cost of the Insignia -$20m legal settlement, lower earnings for Books from a slowdown and the inclusion of Base Chemicals into Dow Jones forecasts.
The broker retains an Outperform rating and the target price falls to $38 from $39.
On June 1, Macquarie downgraded its view on the media sector to Underweight from Neutral, with the broker's macro strategy team putting 60% probability of a mild recession which does not bode well for media companies.
The broker downgraded New Corp to Neutral from Outperform and the target price fell to $21.10.
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