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Bear of the Day: Meredith Corp. (MDP)

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Meredith Corporation (MDP - Free Report) is a media and marketing services company based in Des Moines, IA. The company has two operating segments: National Media and Local Media. As of this year, Meredith is the largest magazine company in the world, and some of its biggest brands include People, Sports Illustrated, InStyle, Better Homes & Gardens, Magnolia Journal, Health, Entertainment Weekly, Cooking Light, and Travel + Leisure, among many others.

Just recently, co-founder of (CRM - Free Report) Marc Benioff and his wife Lynne announced they are purchasing one of Meredith’s top publications, Time magazine, for $190 million. The proposed sale is expected to close within 30 days and will be unrelated to Salesforce.

Shares of MDP have experienced downturn lately, falling over 19% year-to-date, and mixed results in Meredith’s fourth-quarter earnings report added to the stock’s woes.

Looking at Meredith’s Q4 report a little deeper, the publishing company posted adjusted earnings of 69 cents, missing the Zacks Consensus and falling 35.5% year-over-year.

Even with this earnings miss, Meredith’s revenue performance was strong last quarter. Total revenues of $788.1 million came in line with our consensus, and jumped 76.9% from the prior-year period. Advertising revenues grew 63% and circulation revenues more than doubled.

Additionally, was a huge digital driver, generating record traffic.

In its earnings release, President and CEO Tom Harty said "Given the progress made on synergy achievement and asset divestitures, we expect to achieve our goals of reducing debt by $1 billion by the end of fiscal 2019 and generating $1 billion of adjusted EBITDA in fiscal 2020, meaningfully contributing to total shareholder return.”

Despite these revenue numbers, analysts were not impressed, and many lowered their estimates for 2019; the current consensus has fallen well over two dollars from $5.84 to $3.12 in the last 60 days. The outlook for 2020 has fallen as well, down 89 cents during the same time period.

MDP is now a #5 (Strong Sell) on the Zacks Rank.

Meredith remains positive on the Time Inc. properties it gained—the buyout was completed during the quarter—and expects a solid year for political advertising; political advertising revenues at its television stations are projected to be in the band of $55-$65 million for the current fiscal year.

Going forward, management expects Q1 earnings from continuing operation in the range of $2 million and $10 million, and expects adjusted EBITDA to be in the band of $122-$127 million. The effective tax rate for the quarter is forecasted to be 28%.

If you’re an investor looking for a media stock pick to add to your portfolio, you may want to consider E.W. Scripps Co. (SSP - Free Report) . This television, print, and digital media company is a #3 (Hold) on the Zacks Rank, but currently expects about 282% earnings growth for the year.

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