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Analyst Blog

The New York Times Company (NYT - Analyst Report), the publisher of The New York Times, the International Herald Tribune and The Boston Globe, is scheduled to report its second-quarter 2012 financial results on Thursday, July 26.

The current Zacks Consensus Estimate for the quarter is 13 cents a share. The estimates in the current Zacks Consensus range between a low of 11 cents and a high of 16 cents a share. The Zacks Consensus estimates revenue at $509 million for the second quarter.

Recap of First-Quarter 2012

On April 19, 2012, The New York Times Company delivered first-quarter 2012 results. The quarterly earnings of 8 cents a share breezed past the Zacks Consensus Estimate of 2 cents, and was substantially higher than break-even results posted in the prior-year quarter.

The quarter reflects favorable response to the digital subscription packages, increase in circulation revenue and fall in the attrition rate as subscribers to the New York Times’ print version are able to access content or articles online as well as on all applications of The Times for no additional charge. However, these failed to offset the waning print and digital advertising revenues.

The New York Times Company’s top line continued to fall. After declining 2.8% in the fourth quarter of 2011, total revenue slipped marginally by 0.3% to $499.4 million in the first quarter of 2012, and came almost in line with the Zacks Consensus Estimate of $499 million.             

Zacks Agreement & Magnitude

No movement was noticed in the Zacks Consensus Estimate for the second quarter of 2012, either in the last 7 or 30 days, since 6 analysts covering the stock kept their estimates intact in the absence of any major news that could have a direct or an indirect impact on the estimates. 

Positive Earnings Surprise History

With respect to earnings surprises, The New York Times Company has topped the Zacks Consensus Estimate over the last four quarters in the range of 7.1% to 300%. The average remained at 98.5%. This suggests that The New York Times Company has beaten the Zacks Consensus Estimate by an average of 98.5% in the trailing four quarters.

Closing Comment

The company’s advertising volume came under pressure as advertisers shied away from making any upfront commitments, in an economy which has not yet fully recovered.

The publishing industry has long been grappling with sinking advertising revenue. This comes in the wake of a longer-term secular decline as more readers choose free online news, thereby making the print-advertising model increasingly irrelevant.

The ongoing slouch in the advertising market continues to weigh upon The New York Times Company. Total advertising revenue slid 8.1% in the first quarter of 2012, as against a fall of 7.1% registered in the fourth quarter of 2011. Print advertising fell 7.2%, whereas digital advertising revenue dropped 10.3% during the first quarter. Advertising revenue at the News Media Group fell 6.1%.

To curb shrinking advertising revenue and seek new revenue avenues, the publishing companies contemplated charging readers for online content.

Despite hiccups in the economy, what still promises a guaranteed revenue generation avenue is The New York Times Company’s pricing system for NYTimes.com, which was launched on March 28, 2011.

Another media conglomerate, News Corporation (NWSA - Analyst Report) has also moved towards an online subscription-based model for its general news content. News International, a subsidiary of News Corporation, began charging readers for the online content of The Times of London and Sunday Times of London effective June 2010.

The New York Times Company remains committed to streamline its cost structure, strengthen its balance sheet and rebalance its portfolio. As a part of its ongoing strategy to completely offload assets that bear no direct relation with the core operations, the company divested its remaining stake (210 Class B units) in the Fenway Sports Group in May 2012. The company also completed the sale of Regional Media Group to re-focus on its core newspapers and pay more attention to its online activities. Consequently, we have a long-term “Outperform” recommendation on the stock.

However, we remain apprehensive about risks that the company faces due to its high dependence on advertising revenue. This is well defined through a Zacks #3 Rank that translates into short-term ‘Hold’ rating.

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