Meredith Corp's Q4 Earnings Beat Estimates, Revenues Miss - Analyst Blog

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Meredith Corporation ( MDP ) reported adjusted earnings of 88 cents per share for the fourth quarter of fiscal 2014, which was way ahead of the Zacks Consensus Estimate of 84 cents and grew 17.3% on a year-over-year basis. Including one-time items, earnings came in at 89 cents, up 19% year over year.

For the fiscal, adjusted earnings came in at $2.80 per share, beating the Zacks Consensus Estimate of $2.76 per share but declining 3.8% year over year. Including one time items, earnings came in at $2.50, down 8.8%.

Management initiated fiscal 2015 earnings per share guidance and expects it to range from $3.00 to $3.25. Moreover, for the first quarter of fiscal 2015, the company expects earnings to be around 60-65 cents per share as compared with 53 cents in the prior-year period. The Zacks Consensus Estimate for the first quarter and fiscal 2015 are pegged at 63 cents and $3.24, respectively.


Revenues & Margins

Total revenue for the quarter fell nearly 1% to $390.8 million. A fall in Advertising revenues of $204.1 million and Circulation revenues of $87.7 million were partly offset by a rise in other revenues to $99 million. Total revenue fell short of the Zacks Consensus Estimate of $399 million.

For the fiscal, revenues of $1,468.7 million dipped 0.2% year over year and missed the Zacks Consensus Estimate of $1,502 million.

For first quarter of fiscal 2015, total revenue is anticipated to increase in the mid-single digits range.

Total operating expenses for the quarter increased 0.4% to $330.2 million owing to a 3.1% increase in production, distribution and editorial costs, and an 18.9% rise in depreciation and amortization charges. These were partly offset by a 3.1% fall in selling, general, and administrative expenses.

Operating profit grew 4.4% to $60.6 million, while operating margin expanded 50 basis points to 15.5%.

Segment Details

Meredith's National Media Group revenues fell 5.1% year over year to $279.6 million, due to an 8.6% decline in advertising revenues to $122.7 million and 4.4% in Other revenues to $69.2 million. The segment's operating profit was flat at $43 million.

Meredith now projects National Media Group advertising revenues to fall in mid-single digits in the first quarter of fiscal 2015.

Meredith's Local Media Group revenues rose 20.3% to $111.2 million due to a 13.1% increase in non-political advertising revenues to $78.3 million, substantial rise in political advertising revenues to $3.1 million and a 32.6% increase in other revenues to $29.8 million. The segment's operating income fell 8% to $25.5 million.

Management now expects Local Media Group's revenues to increase 35%-40%. Nearly a third of the political advertising revenues will be recorded in the fiscal first quarter of 2015.

Meredith's Growth Catalysts

Meredith boasts a strong portfolio of women's magazines, which helps it gain market share. Further, the company remains focused on bolstering advertising revenues, primarily in the digital space and is increasingly concentrating on brand licensing, marketing services and e-Commerce to counter possible economic downturns going forward.

In Dec 2013, in order to enhance its television portfolio, Meredith agreed to buy television stations in Phoenix and St. Louis from Gannett Co. Inc. ( GCI ) and Sander Media LLC for $407.5 million in cash. Under the deal, the stations that Meredith acquired include KTVK, an independent station in Phoenix, KASW, the CW affiliate in Phoenix and KMOV, the CBS affiliate in St. Louis.

Further, the company announced its plans to acquire Fox and ABC affiliate, WGGB station in Springfield, MA. The transaction is expected to close in the first quarter of fiscal 2015.

In Nov 2013, Meredith launched Allrecipes magazine, the media industry's most important print extension of a digital brand. Advertising interest has been strong, with Procter and Gamble ( PG ), Hershey as well as General Motors making commitments.

Meredith is also an ideal pick for yield-seeking investors. The company, through its total shareholder return (TSR) strategy, intends to boost shareholder value through dividend payouts, share repurchases and strategic investments in business to drive growth. Since the implementation of this strategy two years back, the company has hiked its dividend by 70% and initiated a $100 million share repurchase program.

The company has a history of regularly paying dividends for 67 years. Over the last two decades, it has increased its dividend consistently, which now stands at $1.73 per share. The company's last dividend hike of 6% came in Feb 2014.

Moreover, the company constantly seeks to venture into new arenas and add alternative revenue generating channels through strategic acquisitions and collaborations. Meredith's contract with Wal-Mart Stores Inc. ( WMT ) 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.

The company's brand licensing revenues rose nearly 10% in the year on account of continued robust sales of more than 3,000 SKU's of Better Homes and Gardens' approved products at more than 4,000 Wal-Mart outlets across the U.S.

Other Financial Details

Meredith ended the year with cash and cash equivalents of $36.6 million, long-term debt of $627.5 million and shareholders' equity of $891.7 million. For the fiscal, the company has bought back 1.6 million shares.

As of Jun 30, 2014, Meredith had $108 million worth of shares remaining under its existing share repurchase authorization. The company's leverage ratio (debt to EBITDA) was 2.7 to 1 for the 12 month-period ended Jun 30, 2014.

Currently, Meredith carries a Zacks Rank #2 (Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: MDP , PG , WMT , GCI

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