Washington Post Profit Falls


The Washington Post Company’s (WPO) second-quarter 2012 earnings from continuing operations came in at $5.38 per share, down approximately 22% from $6.88 earned in the prior-year quarter. The decline reflected slump in the students’ enrollment and soft advertising demand.

On a reported basis, including one-time items and discontinued operations, the company posted quarterly earnings of $6.84 per share, up from $5.74 posted in the year-ago quarter.

Revenue for the quarter dropped 5% to $1,006.9 million from the prior-year quarter, reflecting sluggish performance in the Education and Newspaper Publishing divisions, partially offset by strength witnessed in Television Broadcasting and Cable Television divisions.

Education division’s revenue went down 9% to $558.4 million, reflecting a 19% fall in Higher Education revenue, a 4% drop in Test Preparation revenue, and a 6% decline in Kaplan Ventures revenue, partially offset by a 7% rise in Kaplan International revenue. The Education division saw operating income of $3.4 million compared with $21.5 million in the prior-year quarter.

Total student enrollment fell 14% year-over-year and 11% sequentially to 67,605. The company hinted that new student enrollment rose 3% during the first six months of 2012 at Kaplan University and Kaplan Higher Education Campuses.

Television Broadcasting revenue climbed 13% to $95.6 million during the quarter, whereas operating income surged 34% to $43.7 million, attributable to healthy advertising demand. Moreover, political advertising also contributed $4.4 million to the revenue. Cost containment efforts helped in improving operating results.

Cable Television division’s revenue rose 2% to $195.6 million. The division benefited from revenue growth registered across internet and telephone service revenues, but was offset by higher promotional discounts and fall in basic video subscribers’ base. The division’s operating income dropped 5% to $38.4 million attributable to higher programming expenses.

Basic video subscribers fell 4% to 612,729. On the other hand, high-speed data subscribers rose 4% to 462,426 and telephony subscribers grew 8% to 187,095.

Newspaper Publishing revenue came in at $151.8 million, down 7% from the year-ago quarter. Print advertising revenue at The Washington Post tumbled 15% to $56.7 million, reflecting a fall in general advertising. Revenue from newspaper online publishing activities, principally washingtonpost.com and Slate, jumped 8% to $26.3 million, whereas display online advertising revenue climbed 14%. Online classified advertising revenue on washingtonpost.com dropped 2%.

During first-six months of 2012, daily and Sunday circulation at the Post fell 9.3% and 6.1%, respectively, from the year-ago period.

The Newspaper division’s operating loss widened to $15.9 million from a loss of $2.9 million witnessed in the prior-year quarter.

Currently we maintain our long-term Neutral recommendation on the stock. Moreover, The Washington Post Company, which faces stiff competition from The New York Times Company (NYT), holds a Zacks #3 Rank that translates into a short-term Hold rating.

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