Still Neutral on Scripps Networks


On Dec 20, we maintained our Neutral recommendation on Scripps Networks Interactive Inc. (SNI), as the company’s bottom line surpassed the Zacks Consensus Estimates but the top line missed the same in the recently concluded quarter.

Why the Reiteration?

Scripps Networks is witnessing substantial growth in Advertising and Affiliate-fee revenues at its flagship Lifestyle Media business and higher segment profits. Scripps Network is gradually diversifying into mobile platforms for its contents. We believe that both Advertising revenues and Affiliate fee revenues will remain strong in the near future. The company is expected to benefit as the U.S. housing sector is steadily recovering from its prolonged slump.

Scripps Networks completed the acquisition of U.K.-based Travel Channel International Ltd. (TCI). TCI distributes the Travel Channel brand in 20 different languages in 91 countries across Europe, Africa, the Middle East and the Asia-Pacific region. Further, the company made affiliate agreements with nearly 850 distributors of the above-mentioned countries. We believe that successful integration of the U.S. Travel Channel and the U.K. Travel Channel networks will position Scripps Networks as an undisputed leader in this segment.

Scripps Networks launched digital lifestyle video site and distribution platform called “ulive”. This site will offer videos of all the Scripps Networks channels. Moreover, the company has also started a major content distribution technique. In synergy with the cable TV industry’s latest trend of TVEverywhere technology, the company is making its contents available for this platform. Thus, we believe that launch of such innovative services will continue to drive the company’s top line growth going forward.

However, we remain quite concerned regarding higher costs of operations in 2013 as projected by management. The lifestyle programming market is highly competitive. Scripps Networks faces stiff competition in both its Lifestyle Media and Interactive Services businesses from alternative providers of similar services. The company’s national television networks compete with other broadcast and national television networks as well as with home video products and Internet usage for viewers. Additionally, Scripps Networks competes for advertising revenues with other media alternatives including several broadcast networks, the Internet, newspapers, radio stations, and billboards.

Scripps Networks currently has a Zacks Rank #3 (Hold).

Other Stocks Outlook in Related Industries

Other stocks in the Media/Broadcast industry worth considering include Salem Communications Corp. (SALM), Gray Television Inc. (GTN) and Discovery Communications, Inc. (DISCK). All three carry a Zacks Rank #2 (Buy).

Read the Full Research Report on SNI
Read the Full Research Report on GTN
Read the Full Research Report on SALM
Read the Full Research Report on DISCK

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