Investing.com -- Fitch Ratings has upgraded the Long-Term Issuer Default Rating of News Corporation to ’BBB’ from ’BBB-’, maintaining a Stable outlook. This upgrade is attributed to an improved business profile following the sale of Foxtel, a multichannel video programming company, and a consistently conservative balance sheet. The company’s future EBITDA growth is expected to keep the EBITDA leverage below 1.5x over the medium term.
News Corp (NASDAQ: NWSA )’s transition to digital-focused, subscriber-driven cash flow sources, along with consistent revenue streams, a strong international portfolio of digital and print media brands, and its growing professional information business, have also been acknowledged in the rating. The company has been reducing its dependence on advertising revenue.
News Corp completed the sale of Foxtel in early April 2025, leading to a strengthened balance sheet with the repayment of $360 million shareholder loans and a transfer of $724 million in Foxtel debt. By the end of March 2025, the company’s cash balance increased to $2.1 billion, resulting in a net cash balance of $130 million. This transaction improved the company’s gross leverage to approximately 1.4x during LTM March 2025.
News Corp’s advertising revenues have declined from $4.3 billion to $1.4 billion as of FY25, representing around 16% of total revenues, down from 49% since FY13. This is due to an increased focus on cash flow contribution from subscriber-driven sectors such as Dow Jones and Digital Real Estate Services (DRES), and industry-wide linear advertising weakness.
Dow Jones revenue is expected to increase by around 5% in FY26, driven by steady demand for their professional services platform. Digital subscribers to their circulation brands, including The Wall Street Journal and Barron’s Group, continue to grow, accounting for the majority of its subscribers. During 3QFY25, total subscriptions grew by 7%, while digital-only subscriptions rose by 9% within the segment.
The digital portfolio of REA Group, part of DRES, remains the dominant real estate website in continental Australia, while Move, Inc., mostly North American centric, holds a modest position. REA accounted for around 70% of total segment revenues in 9MFY25. Both REA and Move are expected to experience good revenue growth over the medium term as interest rates are likely to trend downward.
The Book Publishing segment, mainly consisting of HarperCollins Publishers, is expected to remain a steady cash flow contributor to News Corp, driven by consistent demand for its backlist titles which constituted 63% of sales in 9MFY25. HarperCollins ranks as the world’s second-largest book publisher. The print and digital books market is perceived as saturated with generally stable demand.
The News Media segment’s structural decline is expected to slow as the company continues to gain new digital subscribers across its portfolio. Digital revenue contribution within the News Media segment is expected to overtake linear sources by FY27-FY28. The segment includes renowned brands such as the New York Post and The Sun.
News Corp’s recent M&A activity has primarily focused on businesses with no advertising exposure. In FY22, the company acquired Oil Price Information Service (OPIS) and Base Chemicals . Both operate under a subscription model with recurring revenues. News Corp is expected to pursue strategic acquisitions to enhance its revenue share from more subscriber-driven digital platforms while reducing its advertising revenues.
News Corp’s peer analysis includes CoStar Group (NASDAQ: CSGP ), Inc. (BBB/Stable), Warner Bros. Discovery, Inc. (NASDAQ: WBD ; BBB-/Stable), and Paramount Global (Paramount; BBB-/Negative). News Corp has a larger operating scale while maintaining comparable leverage to CoStar Group. It has a higher rating than WBD due to WBD’s weak financial profile, and Paramount due to its ability to navigate ongoing industry-wide macroeconomic and operating headwinds.
Fitch’s key assumptions include overall pro forma revenue growth of around 3% in FY26, DRES growth at around 7% annually over the medium term, Dow Jones annual revenue growth at around 4%-6%, and Book publishing growth at around 2% over the medium term. The EBITDA margins are expected to improve over the medium term, and the FCF ranges between $500 million and $700 million annually.
Factors that could lead to negative rating action include unbalanced funding of acquisitions, implementation of shareholder-friendly financial policies, and EBITDA leverage sustained above 2.0x without a credible deleveraging plan. Factors that could lead to positive rating action include a significant increase in operating scale without a significant increase in business risk while maintaining EBITDA leverage below 1.5x on a sustained basis.
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