NY Times (NYT) Beats On Q3 Earnings, Misses Revenue

After witnessing a negative earnings surprise of 8.3% in the second quarter, The New York Times Company (NYSE:NYT) managed to deliver an earnings beat in the third quarter of 2016. The company posted adjusted earnings from continuing operations of 6 cents a share that came ahead of the Zacks Consensus Estimate by a penny but declined 33.3% from the year-ago quarter.

In the reported quarter, The New York Times Company registered an increase in the number of digital subscribers and a rise in circulation revenue. The quarter also witnessed a decline in print advertising revenue but an increase in digital advertising revenue. Adjusted operating costs came in at $324.4 million during the quarter, up 1.4% year over year. Management now expects adjusted operating costs to increase in the mid to high-single digits in the fourth quarter of 2016.

The New York Times Company’s total revenue of $363.5 million fell short of the Zacks Consensus Estimate of $365 million, and decreased 1% year over year.

Circulation revenue grew 3% to $217.1 million, primarily backed by the company’s digital subscription initiatives and a rise in the home delivery price of The New York Times in 2016. Circulation revenue from digital-only subscription jumped 16.4% to $58.6 million. Circulation revenue from digital-only subscriptions to news products rose 15.4% to $56.1 million. Management now projects total circulation revenue in the fourth quarter of 2016 to increase at a rate in line with the third quarter.

Total advertising revenue came in at $124.9 million in the reported quarter, down 7.7% year over year. We observe that the rate of decline decelerated from 11.7% witnessed in the preceding quarter. Print advertising revenue fell 18.5% in the third quarter, following a decline of 14.1% in the previous quarter.

Digital advertising revenue surged 21.4% to $44.4 million, after witnessing a decrease of 6.8% in the preceding quarter. Higher digital advertising revenue came on the back of rise in revenue from mobile platform, programmatic buying channels and branded content, partly offset by a fall in traditional website display advertising.

The company saw a 9.1% drop in the display advertising category and a 17.7% fall in the classified advertising category. The diversified media conglomerate hinted that total advertising revenue in the fourth quarter is likely to decline at a rate equivalent to that of the third quarter.

Total adjusted operating profit plunged 17.7% to $39.2 million on account of a fall in print advertising revenue and higher costs, partly offset by rise in circulation revenue.

Other Financial Aspects

The New York Times Company ended the quarter with cash and marketable securities of about $944.9 million, and total debt and capital lease obligations of approximately $434.9 million. The company incurred capital expenditures of about $6 million during the quarter. Management foresees total capital expenditures of approximately $30 million for 2016.

Conclusion

Advertising, which remains a significant source of revenue, is largely dependent on the global financial health. Softness in advertising demand has been weighing on The New York Times Company’s performance. Consequently, the company is trying every means to shield itself from the impact of an unstable market and contemplating on new avenues of revenue generation. The company had offloaded assets that bear no direct relation to its core operations in order to re-focus on its core newspapers and pay more attention to online activities.

The New York Times Company has been adding diverse revenue streams, such as a pay-and-read model, to stay less vulnerable to economic conditions. The company is also adapting to the changing face of the multiplatform media universe, and has already included mobile and reader application products in its portfolio. Other publishing companies such as New Media Investment Group Inc. (NYSE:NEWM) , Gannett Co., Inc. (NYSE:GCI) and The McClatchy Company (NYSE:MNI) are also trying to adapt to different revenue generating ways.

Despite hiccups in the economy, what still promises revenue generation is The New York Times Company’s pricing system for NYTimes.com, which was launched on Mar 28, 2011. The company notified that the number of paid digital subscribers reached 1,557,000 at the end of the reported quarter – rising 129,000 sequentially (116,000 came from the digital news products and 13,000 from the Crossword product) and 30% year over year.

The New York Times Company remains committed to streamline its cost structure, strengthen its balance sheet, and rebalance its portfolio.

The New York Times Company currently carries a Zacks Rank #4 (Sell).

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