The New York Times Company NYT came out with second-quarter 2019 results, wherein the top line continued to increase year over year, while earnings remained flat with the year-ago period. The company registered higher digital-only subscriptions. Digital advertising also improved during the quarter under review.
However, management informed that the second half of 2019 is likely to be challenging for digital advertising as a result of comparisons against sturdy performance in the prior-year period.
Let’s Delve Deep
The company delivered adjusted earnings from continuing operations of 17 cents a share. The newspaper publisher's total revenue of $436.3 million rose 5.2% year over year.
Subscription revenue grew 3.8% to $270.5 million principally due to increase in the number of subscriptions to the company’s digital-only products. Revenue from digital-only subscriptions products jumped 14.1% to $112.6 million. Management now projects total subscription revenue in the third quarter to increase in the low to mid-single digits, while digital-only subscription revenue is likely to rise in the mid-teens.
The New York Times Company Price, Consensus and EPS Surprise
The New York Times Company price-consensus-eps-surprise-chart | The New York Times Company Quote
Total advertising revenue came in at $120.8 million in the reported quarter, up 1.3% year over year. In the preceding quarter, total advertising revenue had edged down 0.4%. Total advertising revenue in the third quarter are expected to decline in the high-single digits.
Print advertising revenue fell 8% to $62.7 million in the quarter under review, following a decline of 11.9% in the preceding quarter.
Digital advertising revenue jumped 13.7% to $58 million, following an increase of 18.9% in the preceding quarter. Management expects digital advertising revenue to fall in the high-single digits during the third quarter.
We note that other revenue soared 29.7% to $45 million during the quarter under review mainly due to revenue earned from television series, “The Weekly,” and growth in commercial printing operations. Management expects other revenue to increase in the band of 25-30% during the third quarter.
Adjusted operating costs rose 7.2% to $380.7 million during the quarter. This year over year increase was due to increased content costs, comprising rise in the number of newsroom staff and expenses associated to television series, “The Weekly,” as well as labor and raw material costs from commercial printing and advertising costs.
Management now anticipates adjusted operating costs to increase in the high-single digits during the third quarter on account of sustained investment into growing digital subscription business. Total adjusted operating profit declined 6.4% to $55.6 million.
Other Financial Aspects
The New York Times Company ended the quarter with cash and marketable securities of about $846.5 million. The company incurred capital expenditures of about $13 million during the quarter. Management envisions capital expenditures of $50-$60 million in 2019.
The New York Times Company, which shares space with The McClatchy Company MNI, 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, as adopted by the company.
The company notified that the number of paid digital subscribers reached roughly 3,780,000 at the end of second quarter of 2019 – rising 197,000 sequentially and 30.7% year over year. The company has set a goal to reach 10 million total 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 46% so far in the year compared with the industry’s growth of 37%.
Stocks to Consider
Gray Television GTN has a long-term earnings growth rate of 10% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Tribune Media Company TRCO has a long-term earnings growth rate of 9.3%. It carries a Zacks Rank #2.
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