Factors Likely To Influence Meredith's (MDP) Q2 Earnings

Meredith Corporation (NYSE:MDP) is expected to release second-quarter fiscal 2019 results on Jan 30. The company’s bottom line outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with average beat of 52.7%. Let’s take a sneak-peak into what’s in store for Meredith this time around.

Factors to Consider

Strategic Endeavors Undertaken

Meredith’s initiatives in digital space, brand licensing activities, solid portfolio of television stations and a robust earnings surprise history bode well. Keeping in these lines, Meredith is offloading non-core brands to focus on core operations. These seem inevitable due to increasing online readership, which has made the print-advertising model highly redundant.

Meredith has been on a buyout spree in a bid to accelerate growth. In this regard, the company has been making investments, and undertaking acquisitions and partnerships. This Zacks Rank #3 (Hold) company acquired Time Inc. to expand its media portfolio. Management expects to generate cost synergies of more than $500 million annually in the first two years of operations of the combined firm.

Apart from this, the company is on track with its restructuring plans. Following the buyout of Time Inc., Meredith announced its plan to sell Time Inc.'s news and sports brands — TIME, Sports Illustrated, FORTUNE and MONEY. The company recently sold media brand Fortune to Fortune Media Group Holdings Limited. Earlier, the company offloaded Time to Salesforce.com Inc (NYSE:CRM).’s founders and Meredith Xcelerated Marketing to Accenture (NYSE:ACN). Furthermore, the company divested its Time Inc. UK and Golf media brands. Meredith is also exploring options to divest its equity investment in Viant.

Higher SG&A and Interest Expenses a Worry

Meredith is grappling with increasing SG&A expenses for a while now. The company’s SG&A expenses surged almost two folds to $336.1 million in first-quarter fiscal 2019, due to costs associated with TIME acquisition, which was partly negated by decrease in expenses post the sale of Meredith Xcelerated Marketing. Earlier, SG&A costs rose 11%, 50.2% and 65.2% in the second, third and fourth quarters of fiscal 2018, respectively. Also, interest expenses soared more than eight folds to $41.4 million in the first quarter of fiscal 2019 due to high debt. Given this increasing trend, the company’s bottom line may remain under pressure in the near future.

Nonetheless, Meredith will utilize the net proceeds from the recent divestiture of Fortune to lower its debt by $1 billion in fiscal 2019.

Meredith Corporation Price and EPS Surprise

3 Stocks to Consider

World Wrestling Entertainment (NYSE:WWE) has a positive earnings history of 24.4% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

News Corporation (NASDAQ:NWSA) has long-term earnings growth rate of 9.3% and a Zacks Rank #2.

Twenty-First Century Fox (NASDAQ:FOXA) has long-term earnings growth rate of 9.3% and a Zacks Rank #2.

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