Scripps Networks Misses in 4Q

Scripps Networks Interactive Inc. ( SNI - Analyst Report ) has reported weak financial results for the fourth quarter of 2012, which fell below the Zacks Consensus Estimate.Quarterly GAAP net income from continuing operations was $305.8 million or $2.02 per share compared with $135 million or 84 cents per share in the prior-year quarter. However, the fourth-quarter 2012 adjusted earnings per share of 84 cents were way below the Zacks Consensus Estimate of 91 cents. Quarterly total revenue of $604.7 million increased 9.2% on an annualized basis, but fell below the Zacks Consensus Estimate of $617 million.

The fourth-quarter gross profit was $438.8 million compared with $409.9 million recorded in the prior-year quarter. Quarterly gross margin was 72.6% compared with 74.1% in the prior-year quarter. Quarterly operating income dropped 6.1% year over year to $218.9 million. Operating margin in the reported quarter was 36.2% compared with 42.1% in the prior-year quarter.

During fiscal 2012, Scripps Networks generated $614.7 million of cash from operations compared with $728.9 million in fiscal 2011. Free cash flow in fiscal 2012 was $384.9 million compared with $591.1 million in fiscal 2011. At the end of fiscal 2012, Scripps Networks had $437.5 million in cash & marketable securities and $1,384.2 million of outstanding debt on its balance sheet compared with $760.1 million in cash & marketable securities and $1,383.9 million of outstanding debt at the end of 2011. At the end of 2012, debt-to-capitalization ratio was 0.21 compared with 0.45 at the end of 2011.

Lifestyle Media Segment

Quarterly revenue came in at $584.9 million, showing an annualized growth of 6.8%. Within this segment, Advertising revenue climbed 4.3% year-over-year to $409.4 million. Network Affiliate fee revenue stood at $167 million, up 14.7% year over year and Other revenue slipped 13.9% year over year to $8.5 million. Total segment profit was $287.5 million, up 2.4% year over year.

Brand wise, HGTV revenue was approximately $200.2 million, up 5.1% year over year. Total subscriber base was 98.8 million, down 0.1% year over year. Food Network revenue was $214.6 million, up 5.2% year over year. Total subscriber base stood at 99.7 million, up 0.1% year over year. Travel Channel revenue was $71.1 million, up 5.9% year over year. Total subscriber base slid 0.2% year over year to 94.7 million.

DIY Network revenue was $30.4 million, up 12.9% year over year. Total subscriber base was 58.4 million, up 3.4% year over year. Cooking Channel revenue was $24.7 million, up 38.4% year over year. Total subscriber base was 60.1 million, up 3.3% year over year. Great American Country revenue was $7.6 million, up 15.8% year over year. Total subscriber base stood at 62.7 million, up 0.8% year over year. SN Digital revenue increased 9.1% annually to $33.2 million. Other revenue was $3.2 million, down 26.7% year over year.

Corporate Segment

Quarterly total revenue of around $19.8 million was up by a whopping 252.4% year over year. However, segment loss was $21.6 million, down 7.3% year over year.

Other Stocks to Consider

Scripps Networks currently has a Zacks Rank #4 (Sell). However, other stocks in the Media/Broadcast industry, which look attractive, include Entravision Communications Corp. ( EVC - Snapshot Report ) , LIN TV Corp. ( TVL - Snapshot Report ) and Discovery Communications Inc. ( DISCA - Snapshot Report ) . While Entravision and LIN TV both carry a Zacks Rank #1 (Strong Buy), Discovery has a Zacks Rank #2 (Buy).