We reaffirm our long-term Neutral recommendation on
Scripps Networks Interactive Inc.
) following its strong financial results in the second quarter of
2012. Both top and bottom lines beat the Zacks Consensus Estimates.
Scripps Networks is generating solid growth in advertising and
affiliate-fee revenue at its flagship Lifestyle Media businesses
and higher segment profits.
We believe both advertising revenue and affiliate fee revenue
will remain healthy in the near future. Recently, the Board of
Directors has authorized a new $1 billion of share buy-back
program. Further, management has raised its fiscal 2012 financial
Meanwhile, the stock price has soared nearly 70% in the last
year and is currently trading at the high-end of its 52-week price
range. We also remain concerned that the U.S. economy is still not
fully out of the woods. If the U.S. fails to maintain its recovery
momentum, Scripps Networks will again suffer.
Scripps Networks is a pure-play lifestyle cable network
consisting of six channels. All these cable channels have loyal
audiences, who also views Scripps Networks contents in several
non-TV platforms. In the previous quarter, Scripps Networks
improved with respect to several financial metrics compared with
the year-ago quarter.
Total revenue was up 12.5% and total segment profit was up 3.9%.
Affiliate fee revenue was up 13.5% year over year. Advertising
revenue was up 11.3% year over year. We believe this trend will
continue in the near future.
The company entered into a distribution agreement with
) for its lifestyle networks to be viewed by U-verse network
subscribers of AT&T.
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