Meredith Beats by a Hair

Meredith Corp. (MDP - Analyst Report) announced fiscal 2010 first quarter results prior to the opening bell today. The company recorded a GAAP net income of $18.3 million, compared to $18.6 million in the year-ago quarter. Excluding a favorable tax benefit, adjusted earnings per share came in at 34 cents per share, edging past the Zacks Consensus Estimate by a penny. 

The company recorded an 8.7% year-over-year decrease in total revenues to $332.4 million. The decline was primarily caused by a 9.4% decline in advertising revenues to $191.8 million, coupled with a 2.1% reduction in circulation revenues to $69.9 million. 

Meredith’s National Media group (earlier, Publishing group) posted a 7.5% decline in revenues to $271.6 million as performance continues to be affected by the downturn plaguing the print media industry. National Media’s advertising revenue fell 5% to $137 million during the quarter and the company expects it to decline in the mid-single digit range in the second quarter of fiscal 2010. 

The company’s Local Media group (earlier, Broadcasting group) reported a 13.6% year over year reduction in revenues to $60.8 million mainly on account of lower political advertising and continued sluggishness in automobile advertising. The group’s advertising revenue fell 19.1% to $54.6 million. 

Operating expenses decreased 7.7% to $300.8 million, compared to $325.9 million in the year-ago quarter primarily due lower paper prices coupled with Meredith’s initiatives to improve efficiency. However, the rate of fall in sales was higher than the rate of reduction in expenses, causing operating income to decline 17.2% year over year to $31.6 million, while operating margin slipped 100 basis points to 9.5%. 

At quarter end, Meredith’s cash and cash equivalents was $14.3 million, compared to $27.9 million in the previous quarter. During the quarter, Meredith deployed $8.1 million towards capital expenditure, $10.2 million towards dividends and $95 million towards repayment of debt. The company also raised $75 million of long-term debt in the quarter and had total debt of $360 million at the end of the period. 

Moving forward, Meredith expects fiscal 2010 second quarter earnings to range between 33 cents and 38 cents per share and continues to expect full fiscal earnings to range between $1.60 and $2.00 per share. The Zacks Consensus Estimate, derived from 6 covering analysts, on the company’s fiscal second quarter earnings is currently pegged at 35 cents per share, while for the full fiscal year it stands at $1.82 per share. 

We currently have a Neutral recommendation on the stock.