The New York Times Company (NYT">NYT) recently posted better-than-expected fourth-quarter 2010 results. The quarterly earnings of 46 cents a share beat the Zacks Consensus Estimate of 34 cents, and rose 4.5% from 44 cents earned in the prior-year quarter.
The Zacks Consensus Estimate dipped by a penny with one out of 4 analysts covering the stock lowering the estimate in the last 7 days, prior to the earnings release.
On a reported basis, including one-time items, the company posted quarterly earnings of 44 cents, down 8.3% from 48 cents posted in the year-ago quarter.
The New York Times registered a drop in top-line during the quarter. After declining 2.7% in the third quarter, total revenue slipped 2.9% to $661.7 million from the prior-year quarter, and also fell short of the Zacks Consensus Estimate of $664 million.
The ongoing slump in the advertising market continues to weigh upon The New York Times Company, the publisher of The New York Times, the International Herald Tribune, The Boston Globe and 15 other daily newspapers. Total advertising revenue slid by 3.1% to $385.8 million, as against a marginal fall of 1% in third-quarter 2010.
By segment, News Media Group revenue tumbled 2.9% to $626.5 million. Advertising revenue dropped 3% to $352.7 million. Print advertising fell 7.2%, whereas digital advertising jumped 20.3%. Circulation revenue declined 3.6% to $230.7 million due to a fall in the number of copies sold. Adjusted operating profit tumbled 9.6% to $141.9 million due to a fall in revenue.
Management hinted that circulation revenue in first-quarter 2011 is expected to decline in line with what the company witnessed in the second-half of 2010.
About Group segment's revenue fell 3% to $35.2 million due to a decline in display advertising as well as lower cost-per-click advertising. Adjusted operating profit dipped 7.8% to $19.1 million, reflecting a fall in advertising revenue and increase in costs.
Revenue for New York Times' Digital business, which includes NYTimes.com, About.com, Boston.com, climbed 11% to $113.2 million, and now accounts for 17.1% of total revenue, up from 15% in the prior-year quarter. Digital advertising revenue jumped 11.1% to $100.6 million.
Online advertising has now become an integral part of the company's revenue stream with advertisers migrating to the Internet driven by increasing online readership and lower ad prices than print.
To seize the benefit of growing trends among readers, who are surfing the Internet for free news, the publishing companies are now even considering charging readers for viewing online content.
The New York Times Company plans to introduce a 'pay and read' model for NYTimes.com with plans to launch a paid subscription website, BostonGlobe.com in 2011.
The NYTimes.com subscription based model is slated for launch in the first quarter of 2011. However, the subscribers to the New York Times' print version will be able to access online content or articles without shelling out additional charges. The company is also adapting to the dynamics of the multiplatform media universe, which currently includes mobile, social media networks and reader application products.
Another media conglomerate, News Corporation (NWSA">NWSA) has taken a leap towards an online subscription-based model for general news content. News International, a subsidiary of News Corporation, began charging readers for online content for The Times of London and Sunday Times of London effective June 2010.
The New York Times Company also notified that it has been effectively managing its operating costs despite the rise in newsprint prices. Operating costs, excluding one-time items, dropped by 1.8% during the quarter. Management cautioned that given the industry trends, newsprint prices are expected to rise in fiscal 2011.
The company ended fiscal 2010 with net debt of approximately $597 million. The New York Times Company incurred capital expenditures of approximately $15 million during the quarter and about $35 million for the year.
Management now anticipates capital expenditures between $45 million and $55 million for fiscal 2010. The New York Times Company remains committed to streamlining its cost structure, strengthening its balance sheet and rebalancing its portfolio.
Currently, we have a long-term Neutral rating on the stock. Moreover, The New York Times Company holds a Zacks #3 Rank, which translates into a short-term Hold rating, and correlates with our long-term recommendation.
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