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Factors Setting the Tone for Meredith (MDP) in Q4 Earnings

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Meredith Corporation is expected to release fourth-quarter fiscal 2018 results on Jul 27. In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 80.5%. Moreover, it has an average earnings beat of 31.7% for the trailing four quarters.

Let’s see how things are shaping up prior to this announcement.

Meredith Corporation Price and EPS Surprise

 

Factors to Consider

Meredith is exposed to headwinds from declining print media trends, shift from traditional advertising and stiff competition. Though the company is expanding its digital presence, it will take time to complete the metamorphosis. Also, the decline in adjusted EBITDA margin is a woe. Adjusted EBITDA margin contracted 240 basis points and 550 bps in the third and second quarter of fiscal 2018, respectively.

However, the company’s strategic initiatives in digital space, brand licensing activities and solid portfolio of television stations along with a robust earnings surprise history reinforce its position as one of the leading media and marketing companies. Moreover, the company has recently acquired Time Inc to expand its media portfolio. Also, it will enhance Meredith’s digital capabilities and boost consumer revenues from diversified channels. With this deal, the company is anticipated to generate free cash flow, along with cost synergies.

The company is also focused on restructuring actions. Evidently, Meredith offloaded Meredith Xcelerated Marketing to Accenture, recently. Furthermore, the company divested its Time Inc. UK to Epiris and announced plans to sell TIME, Sports Illustrated, Money, Fortune and affiliated media brands. Meredith is also exploring options for the sale of its equity investment in Viant.  

In order to strengthen its foothold in the digital space, the company teamed up with eMeals to chalk out meal plans for home cooks. For all to know, eMeals provides digital meal planning solutions. Allrecipes, Better Homes & Gardens and EatingWell users will now have access to an end-to-end meal planning app, which helps one learn recipes, prepare shopping lists and even aids in grocery fulfillment.

What to Expect?

The Zacks Consensus Estimate for fourth-quarter earnings is 87 cents, reflecting a year-over-year decline of 18.7%. We note that the Zacks Consensus Estimate has been stable in the past 30 days. The Zacks Consensus Estimate for revenues is $788.3 million compared with $45.4 million reported in the year-ago quarter.

What the Zacks Model Unveils

Our proven model does not conclusively show a beat for Meredith this earnings season. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Meredith has an Earnings ESP of 0.00% and carries a Zacks Rank #4 (Sell). This combination makes us less confident of an earnings beat.

Stocks Poised to Trump Earnings Estimates

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

World Wrestling Entertainment has an Earnings ESP of +7.94% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

E.W. Scripps Company (SSP - Free Report) has an Earnings ESP of +8.00% and a Zacks Rank #3.

Viacom has an Earnings ESP of +0.28% and a Zacks Rank of #3.

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