It has been about a month since the last earnings report for Meredith CorporationMDP . Shares have lost about 3.9% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is MDP due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Meredith Q3 Earnings Top, Revenues Lag Estimates
Meredith, which now includes operations of recently acquired Time Inc. delivered third-quarter fiscal 2018 results, wherein earnings marked its fourth consecutive beat and revenues surged more than 50%.
The company reported adjusted earnings per share of 74 cents that came way ahead of the consensus mark of 41 cents. However, quarterly earnings declined 16.9% year over year.
Including restructuring, financing and transaction expenses associated with Time Inc.'s buyout, Meredith reported a loss of $2.41 per share, against earnings of 89 cents recorded in the year-ago period.
Meredith's total revenues came in at $648.8 million that came way below the Zacks Consensus Estimate of $983 million, while it surged 52.5% year over year. The upside was backed by higher advertising and circulation revenues.
Advertising revenues jumped 42.4% to $300.1 million, while circulation revenues soared 68.5% to $162.3 million. Further, all other revenues advanced 57.5% to $186.5 million.
Adjusted EBITDA came in at $111 million, up 33.7% from the prior-year period whereas the adjusted EBITDA margin contracted 240 basis points to 17.1%.
Meredith's National Media Group revenues surged 69.2% to $479.3 million, courtesy of a 75.7% jump in advertising revenues to $218.7 million, 68.5% rise in circulation revenues to $162.3 million and 57.3% increase in other revenues to $98.3 million. The segment's adjusted EBITDA totaled $75.1 million, up nearly 64% year over year.
Revenues at the company's Local Media Group segment ascended 19.8% to $170.2 million. Political advertising revenues increased 35.3% to $2.3 million, while non-political advertising revenues dropped 6.5% to $79 million. Other revenues came in at $88.9 million, up 59% year over year. The segment's adjusted EBITDA came in at $47.5 million that declined 4.2% from the year-ago period.
Meredith ended the quarter with cash and cash equivalents of $372.2 million, long-term debt of $3,120.6 million and total shareholders' equity of $1,136.5 million. During the first three quarters of fiscal 2018, the company generated cash flow from operations of $96.6 million, down 45.7% year over year.
A day before the earnings release, Meredith announced a quarterly dividend of 54.5 cents per share, payable on Jun 15, 2018 to shareholders of record as on May 31. Further, the company has buybacks worth $59 million remaining under its current share repurchase plan as of Mar 31, 2018.
Additionally, management remains on track to bring down debt by $1 billion by the end of fiscal 2019, while it anticipates generating EBITDA of $1 billion in fiscal 2020. With this, the company targets achieving a net debt-to-EBITDA ratio of 2.0 to 1 or better, by fiscal 2020 end.
Apart from concluding the buyout of Time Inc., Meredith has undertaken several other actions post second-quarter earnings announcement. The company divested its Time Inc. UK and Golf media brands and announced intentions to sell the TIME, Sports Illustrated, Money, Fortune and affiliated media brands. Meredith is also exploring the sale of its equity investment in Viant. Apart from this, the company concluded a sales restructuring plan and also implemented a new go-to-market strategy, as part of its advertising and marketing initiatives.
Meredith remains on track to integrate Time Inc. To this end, the company remains committed to enhance the advertising and circulation operations of Time Inc. properties, alongside making efforts to increase revenues and profit margins of the acquired business substantially. Further, it is on track to sell media assets that are not vital to Meredith's business. Notably, the combined company is expected to join the leading national media brands, enhance Meredith's digital capabilities and boost consumer revenue from diversified channels.
Further, management now expects to generate cost synergies of more than $500 million annually in the first full two years of operations of the combined firm. Earlier, management anticipated cost synergies to be at the higher end of the $400-$500 million range.
For fourth-quarter fiscal 2018, management expects revenues from National Media Group to come in a range of $590-$600 million, while Local Media Group is projected to garner revenues of $190 million to $195 million. Adjusted EBITDA is anticipated to be between $153 million and $158 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
Meredith Corporation Price and Consensus
Currently, MDP has a poor Growth Score of F. Its Momentum is doing a lot better with an A. The stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.
Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. Notably, MDP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.