A month has gone by since the last earnings report for New York Times Co. (NYT - Free Report) . Shares have lost about 0.2% 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. <p style="text-align: justify;"><u><strong>NY Times Q2 Earnings Beat, Register Slower Digital Subscriber Growth</strong></u><br /><br />The New York Times Company came under pressure in spite of reporting better-than-expected second-quarter 2018 results. Analysts pointed that slower growth in paid digital subscriber and fall in digital advertising raised investors’ concerns. They even ignored the fact that this was the eighth straight quarter, when this NY-based company delivered positive earnings surprise, while revenue also beat the Zacks Consensus Estimate for the third consecutive quarter.<br /><br />The company delivered adjusted earnings from continuing operations of 17 cents a share beating the Zacks Consensus Estimate of 14 cents. However, the figure came in line with the year-ago quarter figure. The newspaper publisher's total revenue of $414.6 million rose 1.8% year over year, and came ahead of the Zacks Consensus Estimate of $410.8 million.<br /><br /><strong>Let’s Delve Deep</strong><br /><br />Subscription revenue grew 4.2% to $260.6 million, primarily due to increase in the number of subscriptions to the digital-only products. Revenue from digital-only subscriptions products surged 19.6% to $98.7 million. Management now projects total subscription revenue in the third quarter of 2018 to increase in the mid-single digits, while digital-only subscription revenue is likely to rise in the high-teens.<br /><br />Total advertising revenue came in at $119.2 million in the reported quarter, down 9.9% year over year. In the preceding quarter, total advertising revenue had declined 3.4%. Total advertising revenue in the third quarter is projected to decline in the low-single digits.<br /><br />Print advertising revenue fell 11.5% to $68.2 million in the quarter under review, following a decline of 1.8% in the preceding quarter.<br /><br />Digital advertising revenue slid 7.5% to $51 million, following a decline of 6% in the preceding quarter. Management expects digital advertising revenue to increase roughly 10% in the third quarter.<br /><br />Adjusted operating costs came in at $355.2 million during the quarter, up 3.7% year over year on account of rise in marketing and commercial printing costs. Management now anticipates adjusted operating costs to increase roughly 10% in the next quarter due to increased marketing costs and rise in commercial printing operations.<br /><br />Total adjusted operating profit declined 8.2% to $59.4 million as growth in both digital subscription and other revenues was offset by lower advertising revenues and increased marketing costs.<br /><br /><strong>Other Financial Aspects</strong><br /><br />The New York Times Company ended the quarter with cash and marketable securities of about $779.2 million, and total debt and capital lease obligations of approximately $251.9 million. The company incurred capital expenditures of about $15 million during the quarter. Management envisions capital expenditures in the band of $65-$75 million for 2018.<br /><br /><strong>Wrapping Up</strong><br /><br />The New York Times Company has come a long way from being a sole provider of news content and advertising on print publications. The company is no longer restricted to print. As readers swarmed to the Internet, advertisers followed suit and so did newspaper companies. Trimmed print operations paved way for online publications that led to the development of paywalls.<br /><br />The New York Times Company’s pricing system for NYTimes.com. The company notified that the number of paid digital subscribers reached 2,892,000 at the end of second-quarter 2018 – rising 109,000 sequentially and 24% year over year. We note that the company had added 139,000 and 157,000 subscribers during the first quarter and final quarter of 2017, respectively.<br /><br />Industry experts cited that focus on new avenues of revenue generation is necessary to counter the dwindling print advertising revenues. Surely, The New York Times Company has succeeded in this space but the recent fall in the number of users signing up for digital subscriptions did alarm investors.</p>
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -31.58% due to these changes.
At this time, New York Times has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, New York Times has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.