Strategic endeavors, strong political advertising revenue at television stations and sturdy digital ad revenue in both the national and local businesses facilitated Meredith Corporation to deliver outstanding second-quarter fiscal 2017 results. The company posted adjusted earnings of $1.30 per share that surged 63% from the prior-year quarter and also outperformed the Zacks Consensus Estimate of $1.21.

Notably, this is the 13^th straight quarter in which the company has delivered a positive earnings surprise. The trend is reflected in the stock’s performance over the past one year, which shows that it has advanced 42%, while the Zacks categorized Publishing-Periodicals industry has gained 38.5%. However, the company’s cautious revenue outlook for the both the National Media Group and Local Media Group may to an extent hurt investor sentiment.

Management reiterated its earnings per share guidance for fiscal 2017. The company continues to expect adjusted earnings in the band of $3.50-$3.80 per share. For the third quarter earnings are anticipated to be in the range of 75-80 cents a share. The Zacks Consensus Estimate for the third quarter and fiscal 2017 is pegged at 78 cents and $3.70, respectively. Including special items, Meredith envisions fiscal 2017 earnings between $3.78 and $4.08 per share.

Meredith’s total revenue came in at $442.6 million, up 9% year over year, and also came ahead of the Zacks Consensus Estimate of $434.6 million, after missing the same in the preceding two quarters.

The growth in the top line was supported by 11% surge in advertising revenue of $267.1 million, 1% jump in circulation revenue of $66.8 million and 10% increase in other revenues of $108.7 million. Total digital advertising revenue soared 16% in the quarter with traffic across Meredith's digital and mobile sites increased to approximately 90 million monthly unique visitors and video views rose 13%.

Adjusted operating profit came in at $99.9 million, up 56% from the prior-year period, while operating margin expanded 680 basis points to 22.6%.

Segment Details

Meredith’s National Media Group revenue fell 3% to $259.3 million due to a 2% decline in advertising revenue to $135.1 million and a 9% drop in other revenue to $57.4 million, partially offset by 1% increase in circulation revenue to $66.8 million. The segment’s adjusted operating profit totaled $34.3 million, almost flat year over year.

Digital advertising revenue jumped 16% on the back of Allrecipes, Parents and Shape brands, and represented 38% of total National Media Group advertising revenue. As per Publishers Information Bureau, Meredith's share of total magazine advertising revenue expanded 130 basis points to 13.8% led by robust performance of Family Circle, Allrecipes and EatingWell brands.

Meredith now expects National Media Group’s third quarter revenue to be flat to down marginally.

Revenues at the company’s Local Media Group segment climbed 31% to $183.3 million primarily due to an increase in political advertising revenue and other revenue. Political advertising revenue surged to $40 million from $798,000 while other revenue jumped 44% to $51.3 million. On the other hand, non-political advertising revenues declined 11% to $92 million. Digital advertising revenue increased 18%.

The segment’s adjusted operating profit came in at $78.9 million, up significantly from $40.4 million reported in the year-ago period.

Management now expects Local Media Group’s revenue to be flat to down marginally in the third quarter.

Strategic Endeavors

To fortify its position, Meredith has launched additional newscasts in the Atlanta, Phoenix, Portland, Nashville, Greenville and Flint/Saginaw markets. Meredith also renewed its licensing program with Wal-Mart Stores, Inc. (WMT Quick QuoteWMT - Free Report) , which allows it to showcase 3,000 SKUs of Better Homes & Gardens branded products at 5,000 outlets and on Walmart.com. The company’s other new brand licensing programs, includes an EatingWell line of frozen foods; SHAPE fitness apparel; and Allrecipes cooking utensils.

Traffic at the world's largest food media, Allrecipes brand, jumped 13% to an average of over 55 million unique visitors per month. Meredith also launched a new national broadcast television series based on the Allrecipes brand.

Other Financial Details

Meredith ended the quarter with cash and cash equivalents of $44.5 million, long-term debt of $611.7 million and shareholders’ equity of $955.9 million. As of Dec 31, 2016, Meredith had $74 million remaining under its existing share repurchase authorization. The company generated cash flow from operations of $117.3 million in the first six months of fiscal 2017.

Zacks Rank and Stocks to Consider

Meredith currently has a Zacks Rank #3 (Hold). Better-ranked stocks worth considering include Gray Television, Inc. (GTN Quick QuoteGTN - Free Report) flaunting a Zacks Rank #1 (Strong Buy) and Scripps Networks Interactive, Inc. carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gray Television has a long-term earnings growth rate of 6.5%.

Scripps Networks delivered an average positive earnings surprise of 27.9% over the trailing four quarters and has a long-term earnings growth rate of 10.8%.

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