Meredith Corporation ( MDP - Analyst Report ) recently posted better-than-expected fourth-quarter 2012 results. The quarterly earnings of 67 cents a share beat the Zacks Consensus Estimate of 64 cents and increased approximately 1.5% from 66 cents earned in the prior-year quarter.

The improved results were backed by healthy demand for non-political advertising at its Local Media Group, improving trends witnessed across National Media advertising, along with increased readership and online traffic.

On a reported basis, including one-time items, earnings dipped 8.2% to 67 cents from 73 cents delivered in the year-ago quarter.

Management now expects earnings in the range of 50 cents to 55 cents for the first quarter and between $2.60 and $2.95 per share for fiscal 2013. The current Zacks Consensus Estimates for the first quarter and fiscal 2013 are 62 cents and $2.92, respectively.

Consequently, we could see a correction in the Zacks Consensus Estimates in the coming days with analysts revising their estimates to better align with the company’s earnings outlook.

Total revenue for the quarter grew 6.1% year over year to $374.5 million, reflecting an increase of 11.3% in advertising revenue to $310.4 million and a jump of 20.1% in circulation revenue to $78.4 million, partially offset by a decline of 13.1% to $85.7 million in other revenue. However, total revenue fell short of the Zacks Consensus Estimate of $376 million.

Operating expenses for the quarter rose 7.2%, reflecting an increase of 1.4% in production, distribution and editorial costs, 11.5% in SG&A expenses, and 24.1% in depreciation and amortization.

Segment Details

Meredith’s National Media Group revenue increased 5.3% to $289.9 million, attributable to a 12.4% growth in advertising revenue and a 20.1% rise in circulation revenue, partially offset by a decline of 15.5% in other revenue. Excluding the recent acquisitions of “Allrecipes.com,” “EveryDay with Rachael Ray” and “FamilyFun” advertising revenue would have been down 3%, whereas circulation revenue would have been up only 5%.

The over-the-counter drug and financial services categories showed robust trends. However, sluggish performance was witnessed across prescription drug category. The company hinted that Meredith magazines readership touched a record of 116 million while digital advertising revenue doubled during the quarter.

Segment EBITDA declined 17.3% to $43.7 million with EBITDA margin contracting 410 basis points to 15.1%.

Meredith now projects National Media Group advertising revenue to increase in the high-single digits during the first quarter of 2013. However, excluding the recent acquisitions, advertising revenue is expected to decline in the high-single digits in the quarter.

Meredith’s Local Media Group revenue rose 8.9% to $84.7 million. Non-political advertising revenue increased 5.6% to $69.4 million, indicating eleventh successive quarter of year-over-year enhancement. Political advertising revenue came in at $3.3 million, up from $738,000 in the year-ago quarter. Other revenue grew 6.1% to $12 million. Digital advertising revenue soared 70%.

EBITDA at Local Media Group was $33.7 million, up 32.7% from the prior-year quarter, whereas EBITDA margin came in at 39.8% compared with 32.7% in the prior-year quarter.

Meredith’s Growth Catalysts

It's been a constant endeavor of Meredith to explore and add alternative revenue generating channels through acquisitions or by entering into strategic alliances. Thereby, the company attempted to reduce its dependence on conventional advertising.

The sluggish economy prompted Meredith to diversify and add significant revenue streams beyond traditional advertising by leveraging its brands through strategic alliances. Brand Licensing revenue supplemented the sales of the company, led by a rise in sales of Better Homes and Gardens' branded products at Wal-Mart Stores Inc. ( WMT - Analyst Report ) .

The company extended its contract with Wal-Mart Stores through 2016, which includes an expansion of the Better Homes and Gardens branded home decor and garden program at Wal-Mart stores across the United States and Canada.

Meredith remains committed to make strategic investments to increase its revenue generating capabilities while enhancing its profitability. The company is aggressively expanding its brands through online platforms, televisions, videos, mobile applications, and is expanding its reach of food and lifestyle content across tablet products, such as the iPad, NOOK Color, Kindle Fire, and Samsung Galaxy.

Following its growth trajectory, Meredith acquired “Every Day with Rachael Ray” the award-winning magazine of Reader's Digest Association, and assets of “FamilyFun”: magazine from Disney Publishing Worldwide.

Recently, Meredith, the media and publishing company, acquired the world's No. 1 digital food site, “Allrecipes.com” for about $175 million, to expand its digital platform. However, the transaction will hurt Meredith's fiscal 2012 results, but it will be modestly incremental to its earnings per share and free cash flow in fiscal 2013.

Other Financial Details

Meredith ended the fiscal with cash and cash equivalents of $25.8 million, total long-term debt of $380 million and shareholders’ equity of $797.4 million. The increase in total debt was due to the acquisition of “Allrecipes.com.”

During the last twelve months ending June 30, 2012, the company generated cash flows from operating activities of $182 million and repurchased about 1 million shares. The company’s leverage ratio (debt to EBITDA) was 1.6 to 1.

Currently, we maintain our Neutral recommendation on the stock. Moreover, Meredith retains a Zacks #3 Rank that translates into a short-term Hold rating.