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Madison Square Garden (MSG) Q3 Earnings Surpass Estimates

Zacks Equity Research

The Madison Square Garden Company MSG reported mixed third-quarter fiscal 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Notably, this marked the company’s the third-straight quarter of earnings beat.

In the quarter under review, earnings came in at $1.48 per share, exceeding the consensus estimate $1.38. In the prior-year quarter, the company reported earnings of 38 cents per share. Net revenues totaled $517.2 million, which missed the consensus mark of $526 million but improved 12.5% year over year.

Following the quarterly results, shares of the company decreased 3.1% on May 8. However, in the past six months, the stock has gained 11.6% compared with the industry’s 6.7% increase.

Segmental Performance

Madison Square Garden operates under two segments —MSG Entertainment and MSG Sports.

Revenues from the Madison Square’s Entertainment segment totaled $166.5 million, up 4% year over year. The upside can be attributed to higher TAO Group revenues and surge in revenues for the Christmas Spectacular Starring the Radio City Rockettes production.

The segment’s adjusted operating income came in at $7.2 million, down 34.7% from the prior-year quarter number. The metric declined primarily due to a rise in direct operating expenses and selling, general and administrative expenses, which was marginally overshadowed by increase in revenues.

Revenues from the Sports segment rose 17% to $351.6 million. Increase in local media rights fees from MSG Networks, and higher suite license fee revenues and professional sports teams’ ticket-related revenues led to the uptick.

The segment recorded adjusted operating income of $103.1 million, up 74% from the year-ago quarter. This improvement reflects revenue growth, which overshadowed higher direct operating expenses, and selling, general and administrative expenses.

The Madison Square Garden Company Price, Consensus and EPS Surprise

The Madison Square Garden Company Price, Consensus and EPS Surprise | The Madison Square Garden Company Quote

Operating Income

In the quarter under review, Madison Square Garden reported adjusted operating income of $54.1 million, up from $50.1 million year over year.

Balance Sheet

Cash and cash equivalents totaled $1.15 billion as of Mar 31, 2019, compared with $1.22 billion as of Jun 30, 2018. The company ended the fiscal third quarter with long-term debt of nearly $91 million compared with $101.3 million at the end of fiscal 2018.

Madison Square Garden has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks to Consider

Other favorably-ranked stocks in the same space include The Marcus Corporation MCS Planet Fitness, Inc. PLNT and SeaWorld Entertainment, Inc. SEAS. While Marcus sports a Zacks Rank #1, Planet Fitness and SeaWorld Entertainment have the same rank as Madison Square Garden.

Marcus has an impressive long-term earnings growth rate of 15%.

Planet Fitness reported better-than-expected earnings in the trailing four quarters, with the average being 8.9%.

SeaWorld Entertainment posted better-than-expected earnings in all of the preceding four quarters, the average being 35.6%.

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