News Corp shares plunge to a fresh 12-month low on earnings results

News Corporation (ASX: NWS) shares hit a new 12-month low on Friday morning despite the company posting an increase in second-quarter revenues and solid underlying earnings.

Shares in the media giant traded as low as $37.46, down 7.5%, before recovering to be 1.7% lower at $39.80.

The shares have traded as high as $57.16 over the past year; however, they are now at their lowest level for the period.

Solid operating result

The company said in a statement released to the ASX that net income was US$242 million, 21% down on the same quarter last year, which was inflated by a one-off favourable gain on REA Group Ltd (ASX: REA)’s sale of PropertyGuru.

Total segment EBITDA was up 9% to US$521 million, including a one-off $16 million write-down related to inventory at HarperCollins.

Dow Jones revenues were US$648 million, up 8% compared to the previous corresponding period, “driven by 20% growth at Risk & Compliance, higher digital circulation revenues and record digital advertising revenues”.

Book publishing revenues grew 6% for the quarter to US$633 million, while digital real estate services grew 8% to US$511 million.

News Media revenues were steady at $570 million.

Chief Executive Robert Thomson said it was a solid result.

We are delighted to report excellent second quarter results with both revenue and profitability growth accelerating from the prior quarter, and we see favourable signs for the second half of our fiscal year. Revenues increased 6 percent to $2.4 billion for the quarter and profitability improved by a robust 9%. The second quarter results were driven by sustained growth at Dow Jones and Digital Real Estate Services, which both achieved double-digit profit growth and have started the calendar year strongly. Given the current trajectory of our core drivers, we believe prospects for the third quarter are auspicious.

AI not a threat

Mr Thomson reiterated the value of assets such as Dow Jones in the face of the increase in the use of AI in the information space, saying expertise would continue to be paramount.

It is clear that expectations of AI’s impact are continuing to evolve and that the more perceptive players have come to realize that provenance is paramount. What is the point of acquiring cutting-edge semiconductors if they are being deployed to repurpose gormless, factless, feckless content sets? We do believe an increasing number of insightful companies understand this content contradiction and will indeed pay a premium for our premium content. This quarter we expanded our partnership with Bloomberg to include AI rights for our unique Dow Jones content and are progressing with other negotiations.  

Mr Thomson said the company had also continued its share buyback, “reflecting our confidence in News Corp’s strong cash position and belief in the intrinsic value of the company”.

The post News Corp shares plunge to a fresh 12-month low on earnings results appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.