) posted second-quarter fiscal 2013 earnings of 89 cents a share,
a penny ahead of the Zacks Consensus Estimate and up 27% year
over year, owing to the strong advertising revenues along with
However, including one time items, earnings came in at 79
cents a share, up 12.9% year over year.
Going forward, management stood by its earlier guidance and
expects earnings between $2.60 and $2.95 per share for fiscal
2013. Moreover, for the third quarter, earnings are projected in
the range of 65 cents to 70 cents.
Revenue & Margins
Total revenue for the quarter strengthened 10% year over year
to $360.6 million, reflecting an increase of 18% in advertising
revenues to $217.1 million coupled with a rise of 5.5% in
circulation revenues to $67.4 million, partially offset by a
decline of 6.3% in other revenues to $76.1 million. However,
total revenue fell short of the Zacks Consensus Estimate of $373
Adjusted operating expenses for the quarter rose 8.1% to
$296.1 million, reflecting an augmentation of 4.4% in production,
distribution and editorial costs, 11.9% in adjusted SG&A
expenses and 4.4% in depreciation and amortization.
Adjusted operating profit grew 17.6% to $64.5 million, whereas
adjusted operating margin expanded 120 basis points to 17.9%.
National Media Group
revenues increased 2.1% to $249.4 million, attributable to a
12.1% rise in advertising revenues and a 5.5% rise in circulation
revenues, partially offset by a decline of 15.5% in other
Segment's adjusted operating profit plunged 22.5% year over
year to $27.7 million, whereas adjusted operating margin
decreased 360 basis points to 11.1% during the quarter.
The company stated that its investments in business, lower
advertising revenues at comparable magazine titles, and sluggish
performance of Meredith Xcelerated Marketing took a toll on its
The company hinted that Meredith magazine readership attained
a record of 116 million while digital traffic more than doubled
to 35 million during the first six months of fiscal 2013.
For the first half of fiscal 2013, total advertising and
circulation revenues increased 9% year over year, however,
excluding the recent acquisitions of "Allrecipes.com", "EveryDay
with Rachael Ray" and "FamilyFun", advertising revenues would
have waned 9%, whereas circulation revenues would have been down
by 2%. Digital advertising revenues grew more than 110%, however,
excluding the acquisition of "Allrecipes.com", digital
advertising revenues increased 15%.
Meredith now projects National Media Group advertising
revenues to increase in the mid-single digits during the third
quarter of fiscal 2013. However, excluding the recent
acquisitions, advertising revenues is expected to decline in the
Local Media Group
revenues rose 31.7% to $111.2 million, attributable to
significant rise in political advertising revenues that came in
at $25.7 million compared with $1.1 million in the year-ago
quarter. Other revenues nearly doubled to $14.2 million, while
non-political advertising revenues decreased 5.5% to $71.3
million during the quarter.
Segment's adjusted operating income jumped 70.2% to $46.2
million compared with $27.2 million in the prior-year quarter.
Adjusted operating margin expanded significantly to 41.6% from
32.2% during the quarter.
For the first half of fiscal 2013, net political advertising
revenues improved substantially to a record high of $38 million,
while non-political advertising revenues were marginally down.
The company stated that non-political advertising revenues
increased to 3% during the period after election.
Meredith stated that other revenues marked an improvement on
account of higher retransmission revenues during the first half
of fiscal 2013. The company also renewed its long-term
affiliation agreements with
) Fox Broadcasting Co.
Management now expects Local Media Group's total revenue to
increase in the high-single digits, while non-political
advertising revenues are expected to remain flat during the third
Meredith's Growth Catalysts
It's been a constant endeavor by Meredith to explore and add
alternative revenue generating channels through acquisitions or
strategic alliances. Thereby, the company attempted to reduce its
dependence on conventional advertising.
The sluggish economy prompted Meredith to diversify and add
significant revenue streams beyond traditional advertising by
leveraging its brands through strategic alliances. Brand
Licensing revenues supplemented the sales of the company, led by
a rise in sales of Better Homes and Gardens' branded products at
Wal-Mart Stores Inc
). The company extended its contract with Wal-Mart Stores through
2016, which includes an expansion of the Better Homes and Gardens
branded home decor and garden program at Wal-Mart stores across
the United States and Canada.
Meredith remains committed to making strategic investments to
increase its revenue generating capabilities while enhancing its
profitability. The company is aggressively expanding its brands
through online platforms, televisions, videos, mobile
applications, and is expanding its reach of food and lifestyle
content across tablet products, such as the iPad, NOOK Color,
Kindle Fire, and Samsung Galaxy.
Following its growth trajectory, Meredith acquired "Every Day
with Rachael Ray" the award-winning magazine of Reader's Digest
Association, and assets of "FamilyFun": magazine from Disney
Meredith, the media and publishing company, also acquired the
world's No. 1 digital food site, "Allrecipes.com" for about $175
million, to expand its digital platform. The transaction will be
modestly incremental to its earnings per share and free cash flow
in fiscal 2013.
Going forward, management's strategy will be focused upon
bolstering advertising revenue, primarily in the digital space;
enhancing online consumer transactions, especially magazine
subscription orders; focusing on non-advertising depending
activities, such as brand licensing, marketing services and
e-Commerce; and attaining operational efficiencies.
Other Financial Details
Meredith ended the quarter with cash and cash equivalents of
$24.7 million, total debt of $365 million and shareholders'
equity of $817.4 million. During the first half of fiscal 2013
the company repurchased 750,000 shares and has $62 million
remaining under its share buyback program. The company's leverage
ratio (debt to EBITDA) was 1.5 to 1 for the 12 months period
ended Dec 31, 2012.
Currently, shares of Meredith hold a Zacks Rank #3 (Hold).
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