We reaffirm our long-term Neutral recommendation on
Scripps Networks Interactive Inc.
). The company's fourth quarter of 2012 financial results missed
the Zacks Consensus Estimates.
Why Kept at Neutral?
The stock price of Scripps Networks has moved up nearly 40.6%
in the last year, significantly outpacing the S&P 500 return
of 22.6% over the same period. Scripps Networks is currently
trading at the high end of its 52-week price range.
With respect to several valuation metrics, the stock is also
trading at significantly higher multiples compared to the S&P
500. We believe the company is currently fairly valued and the
stock price will not provide above market gain any time soon.
Meanwhile, Scripps Networks is generating solid growth in
advertising and affiliate-fee revenue at its flagship Lifestyle
Media businesses and booking higher segment profits.We believe
both advertising revenue and affiliate fee revenue will remain
healthy in the near future. Scripps Networks currently has a
Zacks Rank #3 (Hold).
Balanced View on Scripps Networks
Scripps Networks is a pure-play lifestyle cable network
consisting of six channels. All these cable channels have a loyal
audience, who also view Scripps Networks contents in several
non-TV platforms. This helps the company to explore the non-TV
verticals, such as, magazines (print media) and websites
Scripps Networksrecently entered into a content licensing deal
). As per the deal, past episodes of Scripps Networks' popular TV
channels will be available on Amazon's subscription-based video
This deal is highly beneficial for Scripps Networks as the
company will earn additional revenue from its past shows. There
is a possibility that Amazon's subscribers may in turn become
viewers of its live TV shows of Scripps Networks, raising the
ratings of these channels.
Nevertheless, the lifestyle programming market is highly
competitive. Scripps Networks faces stiff competition in both its
Lifestyle Media and Interactive Services businesses from
alternative providers of similar services. The company's national
television networks compete for viewers with other broadcast and
national television networks as well as with home video products
and Internet usage.
Other Stocks to Consider
Though we prefer to be on the sidelines for Scripps Networks,
other stocks in the Media/Broadcast industry that warrant a look,
Nexstar Broadcasting Group Inc.
Saga Communications Inc.
). Both these stocks currently carry a Zacks Rank #2 (Buy).
AMAZON.COM INC (AMZN): Free Stock Analysis
NEXSTAR BRDCSTG (NXST): Free Stock Analysis
SAGA COMMS-CL A (SGA): Free Stock Analysis
SCRIPPS NETWRKS (SNI): Free Stock Analysis
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