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New York Times (NYT) Up 5.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for New York Times Co. (NYT - Free Report) . Shares have added about 5.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is New York Times due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

NY Times Q3 Earnings Top, Digital Subscriber Count Up

The New York Times Company reported a positive earnings surprise in the third quarter of 2019, following a miss in the preceding quarter. However, total revenues fell short of the Zacks Consensus Estimate for the third quarter in row. While the top line sustained year-over-year improvement, bottom line declined from the year-ago period.

Notably, the company registered higher digital-only subscriptions during the quarter under review. Meanwhile, digital advertising revenues decreased but fared marginally better than the company’s expectation.

Management had earlier informed that the second half of 2019 is likely to be challenging for digital advertising. It now expects digital advertising to be “fairly challenging” in the fourth quarter as a result of comparisons with the prior-year period’s sturdy performance.

Let’s Delve Deep

The company delivered adjusted earnings from continuing operations of 12 cents a share that came a penny ahead of the Zacks Consensus Estimate but fell 20% from the year-ago period. The newspaper publisher's total revenues of $428.5 million rose 2.7% year over year but came below the Zacks Consensus Estimate of $429.8 million.

Subscription revenues improved 3.7% to $267.3 million principally due to increase in the number of subscriptions to the company’s digital-only products. Revenues from digital-only subscriptions products (comprising news product, as well as Crossword and Cooking products) jumped 14.5% to $115.9 million. Management now projects total subscription revenues in the fourth quarter to increase in the low to mid-single digits, while digital-only subscription revenues are likely to rise in the mid-teens.

Total advertising revenues came in at $113.5 million in the reported quarter, down 6.7% year over year. In the preceding quarter, total advertising revenues rose 1.3%. Total advertising revenues in the fourth quarter are expected to decline in the mid-teens.

Print advertising revenues fell 7.9% to $58.9 million in the quarter under review, following a decline of 8% in the preceding quarter.

Digital advertising revenues decreased 5.4% to $54.7 million, following an increase of 13.7% in the preceding quarter. The fall in digital advertising revenues were due to reduce direct-sold advertising on core digital platforms, partly offset by growth in podcasts. Management now expects digital advertising revenues to fall in the in the mid-teens during the fourth quarter.

We note that other revenues soared 25.9% to $47.7 million during the quarter under review primarily due to revenues earned from television series, “The Weekly.” Management anticipates other revenues to increase in the band of 25-30% during the fourth quarter.

Adjusted operating costs rose 5.7% to $384.4 million during the quarter. This year-over-year increase was due to increased content costs, comprising rise in the number of newsroom staff and expenses associated to television series, “The Weekly,” and increased digital product development employees. This was partly offset by fall in print production and distribution costs.

Management now anticipates adjusted operating costs to increase in the low-single digits during the fourth quarter on account of sustained investment into growing digital subscription business. Total adjusted operating profit declined 17.9% to $44.1 million.

Other Financial Aspects

The New York Times Company ended the quarter with cash and marketable securities of about $877.9 million. The company incurred capital expenditures of about $9 million during the quarter. Management envisions capital expenditures of about $50 million in 2019.

Wrapping Up

The New York Times Company has come a long way from being a sole provider of news content and advertising on print publications. The company is no longer restricted to print. As readers swarmed to the Internet, advertisers followed suit and so did newspaper companies. Trimmed print operations paved way for online publications that led to the development of paywalls, as adopted by the company.

The company notified that the number of paid digital subscribers reached roughly 4,053,000 at the end of third-quarter 2019 – rising 273,000 sequentially and 31% year over year. The company has set a goal to reach 10 million total subscriptions by 2025.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, New York Times has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

New York Times has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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