Meredith in Neutral Lane - Analyst Blog

The improving advertising performance at Meredith Corporation's (MDP) National and Local Media groups, and increasing readership and online traffic have been benefiting the company's top and bottom line results.

Meredith is one of the leading media and marketing companies with interests in publishing, broadcasting, integrated marketing and interactive media. The company boasts of a strong portfolio of women's magazines with a relatively stable circulation, which has helped it gain market share.

Advertising revenue at Meredith magazines − Better Homes and Gardens, Family Circle and Parents − led the growth in advertising revenue during first-quarter 2011. Magazine's top advertising categories, included prescription drugs, retail, household supplies and apparel, whereas soft advertising categories included toiletries and cosmetics, home, and food and beverage.

Meredith has been working diligently to explore and add alternative revenue generating opportunities in order to reduce its dependence on traditional advertising by entering into strategic alliances. These include the expansion of its integrated marketing offers, video related operations, brand licensing, and mobile initiatives.

Marketing revenue climbed 7%, whereas Brand Licensing revenue surged about 17%, led by a rise in sales of Better Homes and Gardens' branded products at Wal-Mart Stores Inc. (WMT). Management expects earnings between 75 cents and 80 cents a share for the second quarter and between $2.50 and $2.75 for fiscal 2011.

The company has been taking initiatives to enhance its online presence. These include the acquisition of online marketing firms – Genex, New Media Strategies, and Healia, and a mobile marketing firm – The Hyperfactory. Meredith also launched Meredith Women's Network covering mostly women-related topics. Monthly average unique visitors to the National Media Group websites were 16 million, and monthly page views averaged 200 million during first-quarter 2011.

However, more than half of Meredith's revenue comes from advertising, which depends upon the health of the economy. An economic downturn stunts advertising demand. Although the economy is gradually regaining pace, publishing and broadcasting revenues still remain susceptible to changes in advertising demand.

Consequently, we prefer to be Neutral on the stock. However, Meredith holds a Zacks Rank #2, which translates into a short-term ‘Buy' rating.

 
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