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Why Is The Madison Square Garden Company (MSG) Up 2.6% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for The Madison Square Garden Company (MSG). Shares have added about 2.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is The Madison Square Garden Company due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Madison Square Garden's Earnings Miss Estimates in Q4

Madison Square Garden reported fourth-quarter fiscal 2019 results, wherein both earnings and revenues lagged the Zacks Consensus Estimate. With this, the bottom line fell short of the Zacks Consensus Estimate after registering a beat in the trailing three quarters. Meanwhile, the top line missed the consensus mark for the second straight quarter.

In the quarter under review, the company incurred a loss of $3.08 per share, wider than the Zacks Consensus Estimate of a loss of $2.34. In the prior-year quarter, Madison Square Garden had incurred a loss of $1.94 per share. Net revenues totaled $263.6 million, which missed the consensus mark of $276 million and declined 17% year over year.

Following the quarterly results, shares of the company decreased 8.9% on Aug 20. Moreover, in the past six months, the stock has decreased 10.1% compared with the industry’s 9.4% decline.

Segmental Performance

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

Revenues from the Entertainment segment totaled $174 million, down 6% year over year. The downside can be mainly attributed to decrease in event-related revenues at the company's venues, soft event-related revenues for the Boston Calling festival, the impact of ASC Topic 606 on suite license fees. The winding down of Obscura Digital’s third-party business too impacted the segment’s revenues.

The segment’s adjusted operating income came in at $1.1 million, down 87% year over year. The metric decreased primarily due to a sharp decline in revenues.

Revenues from the Sports segment declined 32% to $90 million primarily due to the impact of ASC Topic 606, which hurt professional sports teams' regular-season ticket-related revenues, local media rights fees, suite license fees, league distributions and sponsorship and signage revenues.

The segment incurred an adjusted operating loss of $5.7 million due to higher direct operating expenses and soft revenues.

Operating Income

In the quarter under review, Madison Square Garden incurred an adjusted operating loss of $79.9 million compared with operating loss of $44.2 million in the year-ago quarter.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -40.69% due to these changes.

VGM Scores

Currently, The Madison Square Garden Company has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise The Madison Square Garden Company has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.



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