Meredith (MDP) Q2 Earnings Beat Estimates, Revenues In Line

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Meredith Corporation MDP , which completed the acquisition of Time Inc., reported better-than-expected second-quarter fiscal 2018 earnings, surpassing the Zacks Consensus Estimate. However, the company's top line came almost in line with the consensus estimate, after a miss in the previous quarter. Results gained from solid growth in non-political ad revenues at the company's local media group segment as well as sturdy digital performance and robust expense discipline in its national media group.

Q2 Highlights

Meredith posted adjusted earnings per share of $1.14, outpacing the consensus mark of 91 cents. This marked the third straight quarter of positive earnings surprise. However, the bottom line declined 12.3% year over year. In the prior-year quarter, the metric gained from incremental political advertising revenues of 52 cents per share.

Meanwhile, including transaction costs of 23 cents per share associated with Time Inc. buyout, gain of $2.92 due to latest tax reform and an impairment charge of 34 cents, this Zacks Rank #3 (Hold) company recorded earnings of $3.49 per share versus $1.58 in the year-ago quarter.

Meredith Corporation Price, Consensus and EPS Surprise

Meredith Corporation Price, Consensus and EPS Surprise | Meredith Corporation Quote

Meredith's total revenues came in at $417.7 million almost in line with the Zacks Consensus Estimate but down 5.6% year over year. In the year-ago period, the metric benefited from political advertising revenues of $38 million.

While advertising revenues declined 13.2% to $231.8 million, circulation revenues increased 1.3% to $67.7 million. We noted that other revenues advanced 8.7% to $118.2 million. Digital advertising revenues also grew 7% in the quarter. Digital traffic averaged 89 million unique visitors per month.

Adjusted operating profit came in at $72 million, down 27.9% from the prior-year period. Operating margin contracted 540 basis points to 17.2% as well.

Segment Details

Meredith's National Media Group revenues fell 4.6% to $247.4 million as advertising revenues declined 6.9% to $125.8 million and other revenues slumped 5.9% to $54 million, partially offset by a 1.3% gain in circulation revenues to $67.7 million. The segment's adjusted operating profit totaled $34.9 million, up 1.7% year over year.

Revenues at the company's Local Media Group segment were down 7.1% to $170.3 million. The top line included $38 million of high margin political advertising in the year-ago quarter. Nonetheless, non-political advertising revenues rose 13% to $104 million. Political advertising revenues came in at $2.1 million, down sharply from $40.1 million recorded in the year-ago quarter. Meanwhile, other revenues jumped 25.1% to $64.2 million. The segment's adjusted operating profit came in at $50.5 million that plunged nearly 36% from the year-ago period.

Financial Update

Meredith ended the quarter with cash and cash equivalents of $35 million, long-term debt of $631.6 million and total shareholders' equity of $1,146.8 million. In the first half of fiscal 2018, the company generated cash flow of $101.6 million from operations, down 13.4% year over year.

Of late, the company also hiked the dividend by 4.8% to 54.5 cents per share (or $2.18 annually), marking its 25th successive year of raise.

Other Developments

Meredith's acquisition of Time Inc. is likely to create a leading media company serving nearly 200 million Americans across industry-leading digital, television, print, video, mobile, and social platforms placed for growth. Notably, it purchased all shares of Time Inc. for $18.50 per share worth $2.8 billion in cash.

The combined entity is likely to create a diversified media and marketing company. Additionally, it is expected to join the leading national media brands, enhance Meredith's digital capabilities and boost consumer revenues from diversified channels.

Meredith anticipates the deal to be accretive to free cash flow in the year of operation. Also, it expects to generate cost synergies at the higher end of earlier anticipated range of $400-$500 million annually in the first two years of the combined firm's operations.

Looking For Solid Picks, Check These

Investors may count on better-ranked stocks like Entercom Communications Corp. ETM , Nexstar Media Group, Inc. NXST and Sinclair Broadcast Group, Inc. SBGI , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Entercom Communication with a long-term earnings growth rate of 2% has gained 12.2% in the past six months.

Nexstar Media Group with a long-term earnings growth rate of 12.9% has delivered an average positive earnings surprise of 68.6% in the last four quarters.

Sinclair Broadcast Group with a long-term earnings growth rate of 5.8% has gained 21.1% in the past three months.

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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 Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: ETM , SBGI , NXST , MDP

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