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Digital-Only Subscriptions to Aid NY Times (NYT) Q3 Earnings

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The New York Times Company (NYT - Free Report) is likely to register an increase in the bottom line, when it reports third-quarter 2020 numbers on Nov 5, before the market opens. Although the Zacks Consensus Estimate for earnings for the quarter under review has decreased by a penny to 15 cents over the past 30 days, it still suggests growth of 25% from the prior-year quarter.

Notably, this diversified media conglomerate has a trailing four-quarter earnings surprise of 80.7%, on average. In the last reported quarter, the company’s bottom line outperformed the Zacks Consensus Estimate by a significant margin.

However, the company’s top line is expected to decline from the year-ago period. The Zacks Consensus Estimate for revenues is pegged at $413.4 million, suggesting a decline of about 3.5% from the prior-year reported figure.

Factors to Note

The New York Times Company has been grappling with declining print readership and soft advertising revenues for quite some time now. Readers’ preference for accessing news online has made the print-advertising model increasingly redundant. Also, the ongoing pandemic has compelled industries across the board to curtail marketing expenditures.

Management on its last earnings call guided a decline of approximately 35-40% in total advertising revenues for the quarter to be reported, primarily owing to the impact of the coronavirus. Additionally, the company projected a decline of roughly 20% in digital advertising revenues.

Nonetheless, the company has been making concerted efforts to lower dependency on traditional advertising and focus on digitization. It has been diversifying business, adding new revenue streams, realigning cost structure and streamlining operations to increase efficiencies. The company has not only been gearing up to become an optimum destination for news and information but has been also focusing on lifestyle products and services.

Undeniably, the company has been keeping pace with the changing times by utilizing technological advancements to reach their target audience more effectively. The company’s business model with greater emphasis on subscription revenues positions it to mitigate the impact of the ongoing pandemic to an extent. We note that management had earlier forecast an increase of approximately 10% in total subscription revenues and a jump of about 30% in digital-only subscription revenues for the third quarter.

Additionally, management projected adjusted operating costs to be flat or down in the low-single digits as the company defers non-essential spending, while continuing to invest in digital subscription business.

The New York Times Company Price, Consensus and EPS Surprise

The New York Times Company Price, Consensus and EPS Surprise

The New York Times Company price-consensus-eps-surprise-chart | The New York Times Company Quote

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for The New York Times Company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Although The New York Times Company carries a Zacks Rank #3, it has an Earnings ESP of -10.35%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

TEGNA Inc. (TGNA - Free Report) has an Earnings ESP of +15.39% and a Zacks Rank of #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lions Gate Entertainment LGF.A has an Earnings ESP of +45.00% and a Zacks Rank of #2.

Roku, Inc. (ROKU - Free Report) has an Earnings ESP of +9.20% and a Zacks Rank of #3.

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