Meredith Q4 Earnings Beat

Zacks

Meredith Corporation (MDP) posted fourth-quarter fiscal 2013 earnings of 75 cents a share, surpassing the Zacks Consensus Estimate of 71 cents and increasing 12% year over year, owing to the strong performance of National and Local media groups.  

Going forward, management expects earnings to be in the range of $2.60 – $2.95 per share for fiscal 2014. Moreover, for the first quarter of fiscal 2014, earnings are projected in the range of 48 cents – 53 cents.

Revenue & Margins

Total revenue for the quarter strengthened 3% year over year to $387 million, reflecting an increase of 12% in circulation revenue to $87.9 million coupled with a 10.7% rise in other revenue to $94.9 million. However, advertising revenue declined 2.9% to $204.2 million. Total revenue surpassed the Zacks Consensus Estimate of $385 million.

Total operating expenses for the quarter rose 2.7% to $328.9 million, reflecting an augmentation of 4.6% in SG&A expenses coupled with a rise of 1.6% in production, distribution and editorial costs.

Operating profit grew 6.7% to $58 million, whereas adjusted operating margin expanded 50 basis points to 15%.

Segment Details

Meredith’s National Media Group revenues increased 1.6% to $294.6 million, attributable to a 12% improvement in circulation revenues.  Segment’s operating profit increased 14.5% year over year to $43.4 million, reflecting growth at brand licensing activities, Allrecipes and Meredith Xcelerated Marketing.

Meredith now projects National Media Group advertising revenues to marginally increase during the first quarter of fiscal 2014.

Meredith’s Local Media Group revenues rose 9.1% to $92.4 million, attributable to a significant rise in other revenues that came in at $22.4 million.

Political advertising revenues plunged 77.8% to $0.7 million compared with $3.3 million in the year-ago quarter. Non-political advertising revenues decreased marginally to $69.2 million during the quarter.  

Segment’s operating income inched up approximately 1% to $27.7 million, reflecting higher retransmission revenue, offset by increased programming fee and lower political advertising revenue.  

Management now expects Local Media Group’s total revenue to increase marginally, while non-political advertising revenue is expected to increase in the low-single-digit range during the first quarter of fiscal 2014.

Meredith’s Growth Catalysts

Meredith, which competes with Martha Stewart Living Omnimedia Inc. (MSO), boasts a strong portfolio of women’s magazines, which helps it gain market share. The company remains focused on bolstering advertising revenues, primarily in the digital space and is laying more emphasis on brand licensing, marketing services and e-Commerce to make it less susceptible to economic downturns.

Meredith also remains a perfect bet for investors who are seeking both growth and income. The company, through its TSR (Total Shareholder Return) strategy, intends to boost shareholders’ value through dividends, share repurchases and strategic investments in business to drive growth.

The company has a strong history of making dividend payouts for 66 consecutive years. Over the last decade, the company has boosted its dividend at an average annualized rate of 16% and raised dividend annually for 20 straight years.

Moreover, the company constantly endeavors to explore and add alternative revenue generating channels through acquisitions or strategic alliances, which supplements its sales. Meredith extended its contract with Wal-Mart Stores Inc. (WMT) through 2016, which includes an expansion of the Better Homes and Gardens branded home decor and garden program at Wal-Mart stores across the United States and Canada.

Alongside, this Zacks Rank #2 (Buy) stock renewed its long-term affiliation agreements with CBS Corporation (CBS) and Fox Broadcasting Co. We believe these measures will help the company reduce its dependency on traditional advertising and provide ample growth opportunities to increase its revenue generating capabilities, thereby driving profitability.

Other Financial Details

Meredith ended the quarter with cash and cash equivalents of $27.7 million, total debt of $350 million and shareholders’ equity of $854.3 million. In fiscal 2013, the company repurchased 1.5 million shares.  The company’s leverage ratio (debt to EBITDA) was 1.3 to 1 for the 12 months period ended Jun 30, 2013.

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