Divergent Lifts News Corporation's Third-Quarter Earnings

News Corporation reported a 4% increase in comparable earnings before interest, tax, depreciation and amortisation, or EBITDA, to USD 175 million. The performance was helped by a stronger-than-expected contribution from the book publishing division, reflecting the popularity of the Divergent book series. REA Group also contributed strongly, with revenue up 14% and EBITDA up 29%. Both divisions helped to offset declines from the newspaper division which reported a 9% decline in comparable revenues. News Corporation has USD 3.2 billion of cash and continues its pursuit to evolve from its newspaper publishing origins to an increasingly globalised digital media platform. We see merit in the strategy. We make no change to our fair value estimate of USD 18.00 (AUD 20.00). The share price is currently below our fair value estimate and we expect the market will become more favourable to the stock as they gain comfort in the long-term strategic plan to evolve the company.