Washington Post Beats Estimate

The Washington Post Company (WPO - Analyst Report) recently posted third-quarter 2011 results. The quarterly earnings from continuing operations came in at $5.27 per share, marking a substantial decrease from $11.90 delivered in the prior-year quarter. The decline reflected slump in the students’ enrollment and weak advertising demand.

However, the quarterly earnings surpassed the Zacks Consensus Earnings Estimate of $3.85 per share.

On a reported basis, including one-time items, the company posted a quarterly loss of 82 cents per share, reflecting a sharp decline from earnings of $6.84 posted in the year-ago quarter.

Revenue for the quarter dropped 13% to $1,032.6 million from the prior-year quarter, reflecting sluggish performance in the Education, Newspaper Publishing and Television broadcasting division. However, the quarterly revenue came ahead of the Zacks Consensus Revenue Estimate of $1,005 million.

Education division’s revenue went down 16% to $615.9 million, reflecting 33% decrease in Higher Education revenue partially offset by 25% rise in Kaplan International revenue and 27% rise in Kaplan Ventures revenue. Total operating income for the division plunged 83% to $18 million during the quarter.

Due to lower student enrollments total Kaplan Higher Education enrollments plunged 29% to 79,657 as of September 30, 2011, excluding the Kaplan University School of Continuing and Professional Education. 

Moving ahead, the company expects the operating income in Higher Education segment to continue to decline significantly in the current fiscal due to lingering lower student enrollments and additional restructuring costs.

Kaplan Higher Education launched a new program called ‘Kaplan Commitment’, under which, the students of Kaplan University, Kaplan College and other Kaplan Higher Education schools may register to undergo classes to evaluate whether their educational experience commensurate with their needs before incurring a financial obligation. Kaplan will also carry out academic evaluation in order to gauge the probability of the student’s success in the chosen field of study.

The company also notified that those students who wish to withdraw from the program during the stipulated period, defined as risk-free period, and students who do not clear the academic assessments will not be required to pay for the coursework.

New student enrolments dropped 30% during the quarter, negatively impacted by number of students that chose to discontinue after the risk-free period along with sluggish demand.

Television Broadcasting revenue decreased 11% to $73.8 million during the quarter, whereas operating income decreased 5% to $24.1 million, reflecting lack of advertising demand. Moreover, Political advertising revenue also went down $9.6 million during the quarter.

Cable division’s revenue came in at $187.9, reflecting a marginal decrease from $188.7 million in the year-ago quarter. The division’s operating income was $36.8 million, down 9% compared with the previous-year quarter. The decline reflected rise in promotional money offs and increased sales costs. 

Newspaper Publishing revenue came in at $149.3 million, down 9% from $163.4 million in the year-ago quarter. Print advertising revenue at The Washington Post declined 20% to $57.6 million, reflecting a fall in classified, general and zoned advertising. Revenue from newspaper online publishing activities, principally washingtonpost.com and Slate, came down 14% to $23.3 million, whereas display online advertising revenue decreased 17%. Online classified advertising revenue on washingtonpost.com decreased 5%.

During the first nine months, the company marked a 5.4% decrease in daily circulation coupled with a 4.4% decrease in its Sunday circulation year over year.

The Newspaper divisions operating loss stood at $9.9 million, reflecting a sharp descent from an operating loss of $1.7 million witnessed in the prior-year quarter.

Currently we maintain our long-term Neutral recommendation on the stock. Moreover, The Washington Post, which faces stiff competition from The New York Times Company (NYT - Analyst Report), holds a Zacks #1 Rank, which translates into a short-term Strong Buy rating.

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