Meredith Outpaces Estimates - Analyst Blog

Meredith Corporation (MDP), a leading media and marketing company, recently posted second-quarter 2011 results that exceeded the Zacks Consensus Estimate on the heels of healthy demand for political and non-political advertising at its National and Local Media groups, increased readership and online traffic, strength witnessed in Integrated Marketing and Brand Licensing and effective cost management.

The quarterly earnings of 88 cents a share outpaced the Zacks Consensus Estimate of 86 cents and soared 79.6% from 49 cents delivered in the prior-year quarter. Management now expects earnings in the range of 60 cents to 65 cents for the third quarter and in the range of $2.60 to $2.80 per share for fiscal 2011.

The current Zacks Consensus Estimates for the third quarter and fiscal 2011 are 68 cents and $2.74, respectively. We could witness a correction in the Zacks Consensus Estimate for the third quarter as analysts may adjust their estimates to align better with the company's guidance range.  Meredith's shares fell 4.1% or 1.44 to $34.04 during trading hours.

Total revenue for the quarter jumped 8.9% year over year to $366.9 million, reflecting a 14% increase in total advertising revenue and 8.2% increase in other revenue, which was partially offset by a 4.4% decline in circulation revenue due to repositioning of the Special Interest Media business. Total revenue also came ahead of the Zacks Consensus Revenue Estimate of $363 million.

Meredith's National Media Group revenue rose by 3.2% to $269.4 million, attributable to a 4.5% increase in advertising revenue and 7.7% jump in other revenue, partially offset by a 4.4% dip in circulation revenue. Management now expects advertising revenue to be down in the mid-single digits for third-quarter 2011. EBITDA grew 26.1% to $44.7 million, whereas EBITDA margin expanded 30 basis points to 16.6%.

Meredith publishes magazines for women focusing on the home and family. Advertising revenue at Meredith magazines − Better Homes and Gardens, Family Circle and Parents − led the growth in advertising revenue. Magazine's top advertising categories, included prescription and non- prescription drug, household supplies, and media and entertainment categories.

Online advertising revenue surged more than 30% during the quarter, reflecting growth across parenthood, retail and consumer packaged goods categories. Monthly average unique visitors to the National Media Group websites were approximately 20 million, and monthly page views averaged 300 million.

The sluggish economy prompted Meredith to diversify and add significant revenue streams beyond traditional advertising by leveraging its brands through strategic alliances.

Meredith Integrated Marketing revenue climbed 14%, whereas Brand Licensing revenue surged more than 35%, led by a rise in sales of Better Homes and Gardens' branded products at Wal-Mart Stores Inc. (WMT), which now includes 2,500 SKUs compared with 1,500 in the year-ago period.

Local Media Group's revenue soared 28.8% to $97.5 million due to a rise in political and non-political advertising revenues. Political advertising revenue grew to $22 million versus $2.9 million in the year-ago quarter. Non-political advertising revenue rose 2.7% to $69.4 million, reflecting strength across automotive, professional services and retail. Management expects non-political advertising revenue to be up in the high-single digits in third-quarter 2011. Meredith registered strong ratings across its Television stations.

EBITDA at Local Media Group was $44.4 million compared to $23 million in the prior-year quarter, whereas EBITDA margin came in at 45.5% versus 30.4% in the year-ago quarter.

Meredith ended the quarter with cash and cash equivalents of $18.2 million, long-term debt of $195 million and shareholders' equity of $740.3 million. During the first-six months the company lowered its total debt load by $55 million to $245 million. The company generated net cash flows from operating activities of $85 million during the period.

We have a long-term ‘Neutral' rating on Meredith. However, the stock holds a Zacks #2 Rank, which translates into a short-term ‘Buy' recommendation.

 
MEREDITH CORP (MDP): Free Stock Analysis Report
 
WAL-MART STORES (WMT): Free Stock Analysis Report
 
Zacks Investment Research