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NY Times (NYT) Beats on Q1 Earnings, Ad Revenues Decline

The New York Times Company NYT delivered first-quarter 2016 adjusted earnings of 10 cents a share that beat the Zacks Consensus Estimate by a penny but declined 9.1% from the year-ago quarter. Including one-time items, the company recorded a loss of 5 cents a share, narrower than the year-ago period loss of 9 cents.

 

In the reported quarter, The New York Times Company registered an increase in the number of digital subscribers and a rise in circulation revenue. The quarter also witnessed a decline in print and digital advertising revenues. Adjusted operating costs inched up 0.9% to $328 million during the quarter under review. Management now anticipates adjusted operating costs to increase in the low-single digits in the second quarter of 2016.

The New York Times Company’s total revenue of $379.5 million came marginally ahead of the Zacks Consensus Estimate of $378 million, but fell 1.2% year over year.

Circulation revenue grew 2.4% to $218 million, primarily backed by the company’s digital subscription initiatives and a rise in the home delivery price of The New York Times in 2016. Circulation revenue from digital-only subscription packages jumped 14.2% to $54.2 million. Circulation revenue from digital-only subscriptions to news products rose 12.9% to $52.1 million. Management now projects total circulation revenue in the second quarter of 2016 to increase at a rate in line with the first quarter.

Total advertising revenue came in at $139.7 million in the reported quarter, down 6.8% year over year. We observe that the rate of decline increased from 1.3% witnessed in the final quarter of 2015. Print advertising revenue fell 9% in the first quarter of 2016, following a decline of 6.6% in the preceding quarter. Digital advertising revenue declined 1.3% to $41.8 million, after registering an increase of 10.6% in the previous quarter. The company saw a 7.6% drop in the display advertising category and a 12.4% fall in the classified advertising category.

The diversified media conglomerate, which carries a Zacks Rank #4 (Sell), hinted that total advertising revenue in the second quarter may decline at a rate equivalent to that experienced in the quarter under review.

Total adjusted operating profit decreased 12.9% to $51.5 million on account of a fall in advertising revenue and higher costs, partly offset by a rise in circulation and other revenues.

Other Financial Aspects

The New York Times Company ended the quarter with cash and marketable securities of about $874.2 million, and total debt and capital lease obligations of approximately $432.5 million. The company incurred capital expenditures of about $4.9 million during the quarter. Management foresees total capital expenditures of about $45 million for 2016.

During the quarter, the company bought back shares worth $15 million and had $16.2 million remaining under its current buyback program as of Mar 27, 2016.

Conclusion

Advertising, which remains a significant source of revenue, is largely dependent on the global financial health. Softness in advertising demand has been weighing on The New York Times Company’s performance. Consequently, the company is trying every means to shield itself from the impact of an unstable market and contemplating on new avenues of revenue generation. The company had offloaded assets that bear no direct relation to its core operations in order to re-focus on its core newspapers and pay more attention to online activities.

The New York Times Company has been adding diverse revenue streams, such as a pay-and-read model, to stay less vulnerable to economic conditions. The company is also adapting to the changing face of the multiplatform media universe, and has already included mobile and reader application products in its portfolio. Other publishing companies such as Tribune Publishing Company TPUB, Gannett Co., Inc. GCI and The McClatchy Company MNI are also trying to adapt to different revenue generating ways.

Despite hiccups in the economy, what still promises revenue generation is The New York Times Company’s pricing system for NYTimes.com, which was launched on Mar 28, 2011. The company notified that the number of paid digital subscribers reached 1,357,000 at the end of the reported quarter – rising 87,000 sequentially (67,000 came from the digital news products and 20,000 from the Crossword product) and 23% year over year.

The New York Times Company remains committed to streamline its cost structure, strengthen its balance sheet, and rebalance its portfolio. Management plans to invest over $50 million in the next three years to enhance its international digital potential. The company expects to add approximately 45,000–50,000 digital subscriptions to its news product and about 10,000–15,000 digital subscriptions to its Crossword product. The company anticipates that the number of paid digital subscribers would exceed 1.5 million by the end of the year.

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