Meredith Corporation (NYSE:MDP) posted third-quarter fiscal 2017 adjusted earnings of 87 cents a share that met the Zacks Consensus Estimate but declined 5.4% from the prior-year quarter. We note that the company reported in line earnings after registering 13 straight quarters of positive earnings surprises.
Nevertheless, management reiterated its earnings per share guidance for fiscal 2017. The company continues to expect adjusted earnings in the band of $3.85-$3.90 per share. For the fourth quarter, earnings are anticipated to be in the range of 93-98 cents a share. The Zacks Consensus Estimate for the fourth quarter and fiscal 2017 is pegged at 95 cents and $3.87, respectively. Including special items, Meredith envisions fiscal 2017 earnings between $4.13 and $4.18 per share.
Meredith’s total revenue came in at $425.4 million, up a marginal 0.6% year over year and surpassed the Zacks Consensus Estimate of $419.2 million, marking the second consecutive quarter of sales beat.
Advertising revenue declined 5.2% to $210.7 million, while circulation revenue fell 0.3% to $96.3 million. However, other revenue surged 14.1% to $118.4 million. Total digital advertising revenue soared 25% in the quarter with traffic across Meredith's digital and mobile sites increased to approximately 90 million monthly unique visitors. Meredith envisions total revenue to be up marginally in the final quarter of fiscal 2017.
Strategic endeavors such as an increase in digital offerings, the launch of new magazine, The Magnolia Journal, and addition of newscasts across television stations, coupled with its focus on non-advertising revenue generating avenues such as retransmission fees, brand licensing and e-commerce bode well for the stock. Meredith has brand licensing program with Wal-Mart Stores, Inc. (NYSE:WMT) .
We believe these will help lift the stock. In the past six months, the stock has advanced 41.2%, and comfortably outperformed the Zacks categorized Publishing-Periodicals industry that gained 34.9%.
Operating profit came in at $70 million, down 2.7% from the prior-year period, while operating margin contracted 50 basis points to 16.5%.
Segment Details
Meredith’s National Media Group revenue rose 0.5% to $283.4 million due to 5.2% increase in other revenue to $62.4 million, offset by a 1% decline in advertising revenue to $124.6 million and a 0.3% drop in circulation revenue to $96.3 million. The segment’s operating profit totaled $41.3 million, up 7.6% year over year.
Digital advertising revenue jumped 27% and represented 28% of total National Media Group advertising revenue. As per Publishers Information Bureau, Meredith's share of total magazine advertising revenue expanded 110 basis points to 12.1% led by robust performance of Martha Stewart Living, Allrecipes and Traditional Home.
Meredith now expects National Media Group’s fourth quarter revenue to be down marginally.
Revenues at the company’s Local Media Group segment climbed 0.8% to $142.1 million. Non-political advertising revenues declined 7.1% to $84.5 million. Political advertising revenue came in at $1.7 million, substantially down from $5.6 million in the year-ago quarter. On the contrary, other revenue jumped 26% to $55.9 million. Digital advertising revenue increased 10%.
The segment’s operating profit came in at $41.2 million, down 10.8% from the year-ago period.
Management now expects Local Media Group’s revenue to be up mid-single digits in the final quarter.
Other Financial Details
Meredith ended the quarter with cash and cash equivalents of $27.4 million, long-term debt of $568.7 million and shareholders’ equity of $972.7 million. As of Mar 31, 2017, Meredith had $70 million remaining under its existing share repurchase authorization. The company generated cash flow from operations of $178 million in the first nine months of fiscal 2017.
Zacks Rank and Stocks to Consider
Meredith currently has a Zacks Rank #2 (Buy). Better-ranked stocks worth considering include Cable ONE, Inc. (NYSE:CABO) flaunting a Zacks Rank #1 (Strong Buy) and Salem Media Group, Inc. (NASDAQ:SALM) carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cable ONE delivered an average positive earnings surprise of 4.7% over the trailing four quarters and has a long-term earnings growth rate of 3%.
Salem Media delivered an average positive earnings surprise of 53.8% over the trailing four quarters.
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