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NY Times (NYT) Beats on Q1 Earnings, Digital Subscribers Rise

Zacks Equity Research

The New York Times Company NYT delivered better-than-expected first-quarter 2019 bottom-line results and registered higher digital-only subscriptions. Digital advertising also improved significantly. This was the 11th straight quarter, when this NY-based company delivered positive earnings surprise, while revenues came almost in line with the Zacks Consensus Estimate after surpassing the same in the preceding five quarters.

The company delivered adjusted earnings from continuing operations of 20 cents a share that beat the Zacks Consensus Estimate of 12 cents and increased 17.6% from 17 cents recorded in the year-ago period. The newspaper publisher's total revenue of $439.1 million rose 6.1% year over year, and almost met the Zacks Consensus Estimate of $439.7 million.

Let’s Delve Deep

Subscription revenue grew 3.9% to $270.8 million principally due to increase in the number of subscriptions to the company’s digital-only products. Revenue from digital-only subscriptions products jumped 15.1% to $109.9 million. Management now projects total subscription revenue in the second quarter to increase in the low to mid-single digits, while digital-only subscription revenue is likely to rise in the mid-teens.

Total advertising revenue came in at $125.1 million in the reported quarter, down 0.4% year over year. In the preceding quarter, total advertising revenue had increased 5%. Total advertising revenue in the second quarter are expected to be approximately flat.

Print advertising revenue fell 11.9% to $69.5 million in the quarter under review, following a decline of 10.2% in the preceding quarter.

Digital advertising revenue surged 18.9% to $55.5 million, following an increase of 22.8% in the preceding quarter. Management expects digital advertising revenue to increase in the mid-teens during the second quarter.

Adjusted operating costs came in at $386.7 million during the quarter, up 7.9% year over year on account of rise in marketing expenses, labor and raw material costs from commercial printing and newsroom costs. Management now anticipates adjusted operating costs to increase around 8-10% in the second quarter. Total adjusted operating profit declined 5.6% to $52.4 million.

The New York Times Company Price, Consensus and EPS Surprise

The New York Times Company Price, Consensus and EPS Surprise | The New York Times Company Quote

Other Financial Aspects

The New York Times Company ended the quarter with cash and marketable securities of about $808.8 million, and total debt and capital lease obligations of approximately $254.5 million. The company incurred capital expenditures of about $11 million during the quarter. Management envisions capital expenditures of $50-$60 million in 2019.

Wrapping Up

The New York Times Company has come a long way from being a sole provider of news content and advertising on print publications. The company is no longer restricted to print. As readers swarmed to the Internet, advertisers followed suit and so did newspaper companies. Trimmed print operations paved way for online publications that led to the development of paywalls.

The New York Times Company’s pricing system for NYTimes.com. The company notified that the number of paid digital subscribers reached 3,583,000 at the end of first quarter of 2019 – rising 223,000 sequentially and 28.7% year over year. The company has set a goal to reach more than 10 million subscriptions by 2025.

Industry experts cited that focus on new avenues of revenue generation is necessary to counter the dwindling print advertising revenues. Surely, The New York Times Company has succeeded in this space. The company’s efforts to aid growth have led this Zacks Rank #3 (Hold) stock to increase roughly 47% so far in the year compared with the industry’s growth of 30%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other publishing companies such as New Media Investment Group Inc. NEWM, Gannett Co., Inc. GCI and The McClatchy Company MNI are also trying to adapt to different revenue generating ways.

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