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Meredith (MDP) Gains on Q3 Earnings Beat; Raises Guidance

Meredith Corporation’s MDP third-quarter fiscal 2016 adjusted earnings per share of 92 cents outperformed the Zacks Consensus Estimate of 80 cents, and surged 29.6% year over year. Notably, this is the tenth straight quarter in which the company has delivered an earnings beat. Following the results, the company’s shares gained 3.6% yesterday.

The company’s fiscal third-quarter results reflect improvement in the advertising and digital space. Digital traffic surged approximately 20% to almost 80 million monthly unique visitors. The company also intends to produce much more video content in this fiscal year than the previous one.

Digital advertising revenues grew more than 11% in the fiscal third quarter buoyed by core digital brands, specifically Better Homes and Gardens, Parents, and Allrecipes. Also, increase in advertising rate in the Local Media Group supported the growth in digital advertising revenues. National media reported an increase of 45% in advertising revenues, while Local Media Group non-political advertising revenues improved 3.6%.

Management raised fiscal 2016 earnings guidance based on sturdy performance in the first nine months of the fiscal year. Meredith now expects earnings per share in the range of $3.25–$3.30, up from the previous guidance of around $3.05–$3.25.

For the fiscal fourth quarter, earnings per share are projected in the range of $1.01–$1.06. The company had reported earnings of 94 cents per share in the prior-year quarter..

The Zacks Consensus Estimate for fiscal 2016 is currently pegged at $3.14, while for the fourth quarter it stands at $1.05 per share. Given an upbeat projection we could witness an uptrend in the Zacks Consensus Estimate in the coming days.

Revenues and Margins

Total revenue in the reported quarter increased 6.2% year over year to $422.8 million and also surpassed the Zacks Consensus Estimate of $414 million. The top-line growth was driven by an 8% increase in advertising revenues to $222.4 million, 0.6% growth in circulation revenues to $96.6 million and 7.9% rise in Other revenues to $103.8 million.

For the fiscal fourth quarter, total revenues are anticipated to increase in the low- to mid-single digits.

On the other hand, operating profit plunged 171.8% year over year to $128 million in the quarter, while margin declined to 30.3% from previous-year figure of 22.9%.

Segment Details

Meredith’s National Media Group revenues increased 2.4% year over year to $281.8 million on a 6.7% growth in advertising revenues to $125.8 million and 0.6% rise in circulation revenues to $96 million. However, Other revenues declined 3.1% to $61.3 million, while operating profit improved 48.3% to $34.8 million.

Meredith now expects this segment’s revenues to either remain flat or witness a marginal increase in the fiscal fourth quarter.

Revenues at the company’s Local Media Group segment jumped 14.7% to $140.9 million primarily due to an increase in political advertising revenues, non-political advertising as well as Other revenues. Political advertising revenues surged to $5.6 million from $0.3 million, while non-political advertising and Other revenues increased 3.6% and 27.3% to $90.9 million and $44.4 million, respectively. The segment’s operating income totaled $46.2 million, up 46.9% year over year.

Management now expects Local Media Group’s revenues to increase in the mid- to high-single digits in the fiscal fourth quarter.

Other Financial Details

Meredith ended the year with cash and cash equivalents of $17.2 million, long-term debt of $631.3 million and shareholders’ equity of $1,017.4 million. As of Mar 31, 2016, Meredith had $89 million remaining under its existing share repurchase authorization.

Zacks Rank and Stocks to Consider

Meredith currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the same space are AMC Networks Inc. AMCX, Cumulus Media Inc. CMLS and TEGNA Inc. TGNA. AMC Networks and Cumulus Media sports a Zacks Rank #1 (Strong Buy), while TEGNA holds a Zacks Rank #2 (Buy).

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CUMULUS MEDIA (CMLS): Free Stock Analysis Report
 
TEGNA INC (TGNA): Free Stock Analysis Report
 
MEREDITH CORP (MDP): Free Stock Analysis Report
 
AMC NETWORKS- A (AMCX): Free Stock Analysis Report
 
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