News Corp En Route for Record FY26 Profit

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This story features NEWS CORPORATION, and other companies.
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News Corp outperformed analysts' third quarter expectations, led by growth engines Digital Real Estate and Dow Jones.

• News Corp’s third quarter ‘beat’ consensus, alongside early Q4 strength
• Growth engines Digital Real Estate and Dow Jones are delivering
• Upside from potential AI licensing deals
• Buybacks lend further share price support

By Mark Woodruff

Given solid year-to-date growth highlighted in last week’s third quarter results, along with management pointing to ongoing strength into the fourth quarter, global media and information services company News Corp ((NWS)) appears on track to deliver another year of record profitability.

Led by the two key growth engines Digital Real Estate Services and Dow Jones earnings for the quarter rose by 18% on the prior year to US$343m, ahead of the consensus forecast for US$331m.

The business remains resilient despite a weakening macro backdrop and the evolving AI thematic, UBS highlights, with future growth expected from average earnings margin expansion of around 1.3% per annum over the next three years.

In the broker’s view, higher margins will be supported by the Dow Jones’ Professional Information Business and Digital Real Estate, alongside increasing monetisation of AI-related content opportunities.

Management is progressing AI content licensing agreements, reinforcing the value of its proprietary data and providing earnings upside, Macquarie suggests.

This broker continues to view the current valuation as attractive.

UBS views this target as achievable based on its own forecast of around 10% compound annual growth rate (CAGR) over the period.

AI upside

Management is increasingly focused on AI, both through operational efficiencies and monetisation opportunities.

Macquarie sees significant upside from content licensing deals with AI platforms, highlighting a reported agreement with Meta worth up to US$50m annually, alongside existing partnerships with OpenAI and Amazon.

Additional agreements are being pursued. While details remain commercially sensitive, the broker views further deals as key catalysts for earnings upgrades and a higher valuation.

Dow Jones segment

The Dow Jones segment includes The Wall Street Journal and related financial data and information services and has become a major earnings driver due to its high-margin subscription model.

Dow Jones revenue rose by 8% in the third quarter to US$619m. Earnings increased by 11% (to US$147m), including 19% growth in Risk & Compliance and 12% growth in Dow Jones Energy.

For professionals seeking insights into energy markets, sustainability, and commodities, Dow Jones offers several energy-related products and services designed to provide real-time news, data, and analysis across the entire fuel supply chain.

UBS is cautious on investment requirements within the Energy segment (Dow Jones/Oil Price Information Service), noting the space remains highly competitive as participants race to develop new pricing benchmarks, which typically require significant time and capital to establish credibility and adoption.

Digital Real Estate Services

Digital Real Estate Services contributed 11 percentage points (ppts) to earnings growth, Macquarie highlights, supported by underlying growth at 61%-owned REA Group ((REA)) and favourable FX translation.

Benefiting from structural demand for online property listings, this division includes both REA in Australia and an 80% stake in Move Inc, operator of Realtor.com in the US.

Third quarter earnings rose 25% to US$155m, driven by a higher contribution from REA Group and improved performance at Move Inc.

The company has progressively shifted its earnings mix toward higher-growth, digital and subscription-based businesses away from traditional print media.

Book Publishing

Book Publishing, via HarperCollins, provides relatively stable earnings through global book sales.

Benefiting from higher physical and digital book sales, earnings increased to US$73m, a 14% rise compared to the prior year.

Management explained this outperformance was due to higher revenues for digital and physical book sales led by Rachel Reid’s Game Changers, and a $6m impact from recent acquisitions.

News Media

The smallest segment, News Media, generated US$15m in earnings during the third quarter.

This business spans traditional mastheads, increasingly supported by digital subscription revenue, including News Corp Australia and News UK, with titles such as The Australian, The Daily Telegraph and the New York Post, alongside digital platforms like news.com.au.

This segment provided a drag on group performance, detracting -6 ppts from earnings growth.

Jarden explains costs associated with the California Post launch weighed on performance.

Capital management

News Corp ended the third quarter with net cash of US$183m, while its share buyback averaged around US$2m per day during the quarter.

Morgan Stanley notes management intends to maintain an accelerated pace of share buybacks, viewing the current share price as undervaluing the business.

Outlook

News Corp stock is trading on around 10x FY27 earnings, slightly above its five-year average, which UBS considers attractive given confidence in the company’s medium-term, macro-resilient growth drivers.

The company has multiple levers to drive further penetration, including pricing increases, development of new benchmarks and expansion of compliance data, which the broker expects to benefit from ongoing geopolitical uncertainty.

Over the past three years, News Corp has delivered earnings margin expansion of around 1% per annum, supported by Dow Jones and Digital Real Estate. This trend is expected to continue over the next three years, with Move becoming an increasingly meaningful contributor.

Morgan Stanley believes the ongoing buyback, balance sheet flexibility, potential upside from AI/content licensing and further portfolio simplification could support a re-rating of the shares and a narrowing of the current discount to its sum-of-the-parts (SOTP) valuation.

Following third quarter results, Macquarie upgrades its rating to Buy or equivalent from Hold, joining the two other daily monitored brokers in the FNArena database (UBS and Morgan Stanley) with similar positive assessments.

Excluding Morgan Stanley, which sets a US dollar target, the average target increased to $52.13 from $50.20, implying 23.4% upside to the $42.23 share price at the time of writing.

Morgan Stanley raises its target by US$2.00 to US$34.00.

Outside of daily coverage, Jarden has a $46.30 target and an Overweight rating, midway between Buy and Hold in this broker’s rating system.

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