Stock Wars: New York Times Company Vs. News Corp

Benzinga’s weekly Stock Wars matches up two leaders in a major industry sector, with the goal of allowing readers to decide which company is the better investment. This week, the duel is between two influential and often controversial media giants: The New York Times Co NYT and News Corp NWSA.

The Case For The New York Times: The New York Times published its first edition on Sept. 18, 1851. The company has been listed on the New York Stock Exchange since 1967 and carries two categories of stock, a publicly-traded Class A and a privately-held Class B, mostly held by the descendants of Adolph Ochs, who acquired the newspaper in 1896.

In addition to its namesake newspaper and its related assets, the company also owns the experiential agency Fake Love LLC and the product review site WireCutter, and it holds a minority ownership in Madison Paper Industries, a majority ownership in Northern SC Paper Corporation, and real estate and financial services operations tied to its brand.

In its first-quarter earnings report released last month, the New York Times recorded $473 million in total revenues, up 6.6% from $443.6 million one year earlier. Subscription revenues were up 15.3% to $329.1 million, but advertising revenues skidded by 8.5% to $97.1 million and other revenues took a 10% tumble to $46.8 million.

The company noted that the good news on its subscription revenues increase came with a caveat: this uptick was “primarily due to growth in the number of subscriptions to the company’s digital-only products, which include our news product and our Games, Cooking and Audm products, as well as a benefit from subscriptions graduating to higher prices from introductory promotional pricing.”

While the company’s revenue from digital-only products increased 38.1% during the quarter to $179.6 million, its print subscription revenues dropped 3.8% to $149.5 million, although revenue from domestic home delivery subscription products grew 0.5%.

Also in the quarter, the company’s operating profit increased to $51.7 million from $27.3 million in the same period of 2020 and its adjusted operating profit increased to $68.1 million from $44.3 million over the same period due to higher digital-only subscription revenues and higher digital advertising revenues that offset declines in print advertising, print subscription and other revenues.

The New York Times’ first quarter diluted earnings per share (EPS) from continuing operations was 24 cents, compared with 20 cents one year earlier. Adjusted diluted EPS continuing operations was 26 cents, up from 17 cents in the first quarter of 2020.

Meredith Kopit Levien, president and CEO, observed the company ended the quarter with “more than 7.8 million paid subscriptions across our digital and print products, more than 100 million registered users, and an average weekly audience of 76 million readers.” She added the company “recorded a significant improvement in profitability in the first quarter, thanks to the size and strength of our current digital subscription base and an improvement in digital advertising.”

The New York Times began trading on Wednesday at $42.75, closer to its 52-week low of $37.21 than to its 52-week high of $58.73.

Related Link: Amazon Blames Social Media Sites For Enabling Fake Review Authors

The Case for News Corp: News Corp came about in 2013 as a spinoff from Rupert Murdoch’s News Corporation, which was founded in 1980.

The company’s media assets span three continents and cover print, broadcast and digital media, with its most notable U.S. properties including Dow Jones & Company, the Wall Street Journal, the New York Post, Barron’s, MarketWatch and HarperCollins.

News Corp began trading on the NASDAQ on July 1, 2013. On that day, the former News Corporation broadcasting and media properties were rebranded as 21st Century Fox and most of that company’s assets were acquired by Walt Disney Co DIS in 2019. Fox Corporation FOX consists of the assets not acquired by Disney, including Fox News, Fox Broadcasting Company and Fox Sports.

The company’s fiscal third-quarter earnings report was published last month and it recorded total revenues of $2.34 billion, up 3% from $2.27 billion in the prior-year period. This uptick primarily credited by the $176 million, or 8%, positive impact, from foreign currency fluctuations and continued growth in its digital real estate services including Move, the operator of Realtor.com, in addition to its book publishing and Dow Jones segments.

The company added the quarterly growth “was partially offset by lower revenues at the News Media segment, primarily driven by a $199 million, or 9%, negative impact from the divestiture of News America Marketing, weakness in the print advertising market and a $28 million, or 1%, negative impact from the closure or transition to digital of certain regional and community newspapers in Australia.”

News Corp’s net income for the quarter was $96 million, a turnaround from the net loss of $1 billion in the prior year. The company reported a third quarter total segment EBITDA of $298 million, a 23% increase compared to $242 million in the prior year. Net income per share attributable to stockholders was 13 cents, an improvement from the $1.24 loss one year prior, while the adjusted EPS of 9 cents was up from 3 cents in the prior year.

CEO Robert Thomson proclaimed the company’s “financial year is on a trajectory to be the most profitable since our reincarnation in 2013,” noting the quarterly results “vindicate the strategy of simplifying the asset mix, vigorously pursuing digitization, slimming the cost base, and investing in three growth areas — digital real estate services, Dow Jones and book publishing — which collectively generated 55% segment EBITDA growth in the third quarter.”

News Corp’s Class A shares opened for trading on Wednesday at $25.52, below its 52-week high of $27.97 and far from its 52-week low of $11.24. Its Class B shares opened at $24.16, just below its 52-week high of $26.21 and distant from its 52-week low of $11.31.

The Verdict: The most striking element of the companies’ respective quarterly earnings reports was that they talked up everything except their flagship publications.

The profitable revenue streams have little to do with the print editions of their newspapers, which makes a new case for easing away from these increasingly outdated resources.

Try to imagine Ford Motor Company F keeping the Model T as part of its vehicle offerings and you’ll get the idea of the strangeness in stubbornly keeping print resources that are not pulling their weight.

Also absent from the quarterly reports is the seismic shift in the news landscape. With the Sturm und Drang of the front-and-center former President Donald Trump replaced by a lower-energy and often elusive President Joe Biden, and with 2020’s upheavals mostly evaporating with a vaccinated return to near-normalcy and greater urgency in addressing long-simmering social injustice issues, the 24/7 news cycle is now playing a less dominant role in the public’s life.

Barring unexpected scandals or catastrophes, the companies need to strategize for an audience that will become less hooked on them for constant information.

The companies are also facing increased online competition for headline news from platforms offering their content freely. Both the New York Times and News Corp rely heavily on paywalls, and it is easy to assume these barriers are driving Internet readers to seek the same news on other platforms where access is free.

News Corp is a more diversified operation than the New York Times, with an eclectic mix of assets that nearly offers something for everyone. Its stock performance is the more muscular of the two. The New York Times has seen its stock take a slide for most of this year, which was not addressed in the quarter earnings, while both Class A and Class B of News Corp stock are near their 52-week highs.

In this Stock Wars duel, News Corp comes out ahead of its rival and is the recommended stock for consideration. However, there needs to be a post-script with that verdict: The company’s 3% year-over-year revenue increase is a bit on the anemic side, and investors may want to keep an eye on the company’s next quarterly earnings to see if greater momentum has been achieved.

Related Link: Madison Square Garden Acquires MSG Networks In All-Stock Deal