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New York Times (NYT) Down 4.9% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for New York Times Co. (NYT - Free Report) . Shares have lost about 4.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is New York Times due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

The New York Times Q1 Earnings & Revenues Top Estimates

The New York Times continued with its positive earnings surprise streak in first-quarter 2021, reporting the seventh straight quarter of a bottom-line beat. Additionally, total revenues surpassed the Zacks Consensus Estimate after a miss in the preceding quarter. Moreover, both revenues and earnings improved on a year-over-year basis.

Notably, the digital-only subscriptions and digital advertising revenues increased in the quarter under review. However, both print advertising revenues showcased a decline from the year-ago period. Management anticipates growth in total advertising revenues in the second quarter of fiscal 2021, with digital advertising revenues witnessing significant growth.

New York Times delivered adjusted earnings from continuing operations of 26 cents a share that beat the Zacks Consensus Estimate of 15 cents and rose 52.9% from 17 cents in the year-ago period. The newspaper publisher's total revenues of $473 million surpassed the Zacks Consensus Estimate of $466 million and improved 6.6% on a year-over-year basis.

Adjusted operating costs rose 1.4% to $404.9 million in the reported quarter. Management anticipates adjusted operating costs to increase in the mid- to high-teens in the second quarter of 2021, owing to continued investments in avenues likely to boost digital subscription.

Total adjusted operating profit grew 53.7% to $68.1 million in the quarter under review. Operating profit benefited mainly from higher digital-only subscription revenues and increased digital advertising revenues. This was, however, offset by reduced print advertising, print subscription and other revenues.

Subscription Revenues Rise

Subscription revenues improved 15.3% to $329.1 million mainly on an increase in the number of subscriptions to the company’s digital-only products, which include news, Games, Cooking and Audm products. Additionally, gains from subscriptions from higher prices of introductory promotional pricing aided subscription revenues. Revenues from digital-only products jumped 38.1% to $179.6 million.

Print subscription revenues fell 3.8% to $149.5 million on account of a decline in single-copy and bulk sales revenues. Revenues from domestic home delivery subscription products rose 0.5% in the quarter under review.
 
The company ended the reported quarter with approximately 7,816,000 subscriptions across its print and digital products. Management notified that the number of paid digital-only subscribers reached roughly 6,991,000 at the end of the first quarter, rising 301,000 sequentially and 1,990,000 year over year. Of the 301,000 total net additions, 167,000 came from the digital news product, whereas the remaining came from Cooking, Games and Audm products.

Management projects second-quarter 2021 total subscription revenues growth of about 15%, while digital-only subscription revenues are projected to rise 30%.

Advertising Revenues Still Soft

Total advertising revenues were $97.1 million in the reported quarter, down 8.5% year over year. In the preceding quarter, total advertising revenues slumped 18.7%. Total advertising revenues in the second quarter of 2021 are projected to increase about 55-60%.

Print advertising revenues fell 31.6% to $37.6 million in the quarter under review, following a decline of 37.9% in the preceding quarter. The metric declined as the ongoing pandemic further accelerated secular trends, severely impacting the entertainment, media and luxury categories.

Meanwhile, digital advertising revenues improved 16.3% to $59.5 million, following a decline of 2.3% in the preceding quarter. The rise in digital advertising revenues was due to increased direct-sold advertising, comprising of traditional displays and podcasts. Also, digital advertising revenues benefited from favorable year-over-year comparisons as digital advertising revenues remained soft in the prior-year quarter, owing to lower advertiser spending during the onset of the pandemic. Management expects digital advertising revenue growth of 70-75% for second-quarter 2021 mainly due to favorable year-over-year comparisons.

Other Highlights

Other revenues declined 10% to $46.8 million in the quarter under review due to fewer television episodes, and a decline in revenues from commercial printing, building rental income and live events. These were partly mitigated by higher Wirecutter affiliate referral revenues. Management anticipates other revenues to improve in the low single-digits.

Financial Aspects

New York Times ended the first quarter with cash and marketable securities of $890.7 million, reflecting an increase of $8.7 million from fourth-quarter 2020. The company has a $250-million revolving line of credit through 2024. As of Mar 28, 2021, it had no outstanding borrowings under the credit facility and no other outstanding debt obligations. It incurred a capital expenditure of about $7 million in the reported quarter. Management envisions a capital expenditure of about $50 million for 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 60.61% due to these changes.

VGM Scores

Currently, New York Times has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise New York Times has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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