In-Depth Financial Analysis of News Corporation's 10-K Report

Key Insights

• Recommendation: Buy. The significant recovery in net income and solid growth in key segments position News Corp favorably for future growth. The strategic acquisitions and a diversified revenue base enhance its market resilience.

Overview of the Financial Report

The financial report filed by News Corporation (CIK: 0001564708) for the fiscal year ending June 30, 2021, reveals comprehensive insights into the company’s performance across various segments. The report outlines significant growth in revenues, improvements in net income, and strategic movements regarding taxes and acquisitions.

Financial Highlights

1. Revenue Performance

• Total Revenues: $9.358 billion
• Fiscal 2020: $9.008 billion (up 3.9% year-over-year)
• Fiscal 2019: $10.074 billion

Key Segment Contributions:

• Digital Real Estate Services: $3.146 billion (up from $2.322 billion)
• Subscription Video Services: $3.515 billion (slight increase from $3.459 billion)
• Dow Jones: $2.798 billion (up from $2.480 billion)

The growth in Digital Real Estate Services and Dow Jones indicates a robust demand in digital platforms and information services, aligning with broader market trends towards online services.

2. Profitability Metrics

• Net Income:
• Fiscal 2021: $389 million
• Fiscal 2020: $(1.545) billion (recovery of over $1.9 billion)
  
• Earnings per Share (EPS):
• Basic: $0.56 in 2021, compared to $(2.16) in 2020.
• Diluted: $0.56 in 2021, compared to $(2.16) in 2020.

The dramatic recovery from a significant loss in 2020 underscores effective cost management and revenue generation strategies.

Segment Analysis

1. Digital Real Estate Services

• Revenue: $3.146 billion (up 35% from previous year)
• Growth Drivers: Increased online traffic and engagement due to market demand for digital property services.

2. Subscription Video Services

• Revenue: $3.515 billion (stable growth)
• Challenges: Competitive landscape requires ongoing investment in content and technology.

3. Dow Jones

• Revenue: $2.798 billion (up 12.8%)
• Strategic Moves: Enhanced focus on subscription-based news services has driven growth.

4. Book Publishing

• Revenue: $1.985 billion
• Performance: Reflects strong sales amid increased consumer demand for print and digital books.

5. News Media

• Revenue: $2.209 billion
• Decline: Challenges in traditional media continue to impact revenue.

Expenses and Liabilities

• Total Liabilities: Increased from $14.261 billion in 2020 to $16.771 billion in 2021, largely due to new debt incurred through acquisitions.
• Debt Instruments:
• Active management of debt with significant refinancing and restructuring.
  

Tax Position

• Deferred Tax Assets: Net deferred tax assets increased to $118 million from $74 million.
• Valuation Allowance: The deferred tax valuation allowance grew, indicating a cautious approach to recognizing tax benefits.

Acquisitions and Strategic Moves

• Recent Acquisitions:
• Oil Price Information Service for $1.15 billion, enhancing energy pricing analytics.
• 18% interest in PropertyGuru, indicating expansion into Southeast Asian markets.

These strategic acquisitions show the company's commitment to diversifying its revenue streams and expanding its market presence.

Future Outlook

The combination of a diversified revenue base, strategic acquisitions, and a return to profitability positions News Corporation well for future growth. The company’s proactive management of tax liabilities and investments in digital platforms and services suggest a positive trajectory in a rapidly changing media landscape.

Conclusion

The financial report indicates that News Corporation is on a strong recovery path with substantial growth in key segments and a significant rebound in net income. The strategic acquisitions and improved operational efficiency provide a solid foundation for future growth. Given these factors, the recommendation is to buy shares in News Corporation for investors looking for growth potential in the media and digital services sector.