Dow Jones growth stalls
2Q23 RESULT
Need To Know
- Revenue in-line, EBITDA +3% ahead of market.
- Dow Jones momentum is slowing, with just +10k subscribers added in 2Q vs +100k average since 2021.
- 5% global headcount reduction.
- No update on plans to divest US real estate asset MOVE.
Visible signs of a slowdown in NWS earnings growth are a key focus of this quarter. Whilst the market had factored in a slowing from the high growth rates during the pandemic, the 30% fall in EBITDA 2Q23 vs 2Q22 is stark.
Falls are pretty much across all divisions led by Publishing (Book publishing suffered from changes in Amazon warehouse distribution), Digital Real Estate (negative listing growth in AU and US) and News Media (a very volatile part of the group).
Dow Jones which includes Wall Street Journal (WSJ) saw subscriber growth of just +10k in the quarter, a marked slowdown from the +100k quarterly average over the last 2 years. This is the highest quality part of NWS so investors’ attention will be elevated in this area. On a yearly basis, subscriber growth stands at +9%. Revenue growth with Dow Jones has slowed to +1% in 2Q23 vs +6% in 1Q23.
No update on the potential sale of US real estate business MOVE to CoStar for ~US$3bn. NWS would not be drawn into how any potential proceeds would split between capital management and reinvestment back in the business.
Investment View
NWS earnings are highly cyclical and despite changes to the business model over the last 3 years, earnings are still heavily exposed to the advertising cycle. We expect the earnings headwinds will get stronger from here for earnings growth.
Our HOLD rating is premised on a modest decline in earnings over FY23E in order of 10-15%, rather than a catastrophic collapse in earnings (>30%). Market current factoring in -10%.
Additionally, two forms of potential corporate activity could release significant value to shareholders. The divestment of MOVE would help, whilst the longer-dated succession planning and corporate ownership structure of NWS has the potential to help close the ~30% ‘News Corp Discount’ that NWS trades at vs rival media companies. We think the later issue will gain increased focus from NWS as Rupert Murdoch (Executive Chairman) moves into his early 90s during 2023.
Figure 1: Dow Jones subscriber growth slowing markedly
Stock Overview
Share Price
Company Overview
NWS is a global, diversified media and information services company. Its businesses include digital real estate (REA, MOVE), subscription video services (Foxtel), news and information services (Dow Jones, The Times and Sunday Times, News Corp Australia) and book publishing (Harper Collins, Houghton Mifflin Harcourts).
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