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New York Times (NYT) Down 5% 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 5% 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.

NY Times Q3 Earnings Beat, Digital Subscribers Surge

The New York Times Company posted better-than-expected third-quarter 2018 results and registered higher digital-only subscriptions. Digital advertising also improved significantly. This was the ninth straight quarter, when this NY-based company delivered positive earnings surprise, while revenue also beat the Zacks Consensus Estimate for the fourth consecutive quarter.

The company delivered adjusted earnings from continuing operations of 15 cents a share that beat the Zacks Consensus Estimate of 13 cents, and rose from 12 cents in the year-ago period. The newspaper publisher's total revenue of $417.3 million rose 8.2% year over year, and came ahead of the Zacks Consensus Estimate of $410.3 million.

Let’s Delve Deep

Subscription revenue grew 4.5% to $257.8 million, primarily due to increase in the number of subscriptions to the digital-only products. Revenue from digital-only subscriptions products surged 18.1% to $101.2 million. Including the impact of the additional week in 2017, management now projects total subscription revenue in the fourth quarter of 2018 to decline in low to mid-single digits, while digital-only subscription revenue is likely to rise in the high-single digits.

Total advertising revenue came in at $121.7 million in the reported quarter, up 7.1% year over year. In the preceding quarter, total advertising revenue had declined 9.9%. Total advertising revenue in the fourth quarter is projected to decline in the mid-single digits.

Print advertising revenue fell 0.7% to $63.9 million in the quarter under review, following a decline of 11.5% in the preceding quarter.

Digital advertising revenue increased 17.3% to $57.8 million, following a decline of 7.5% in the preceding quarter. Management expects digital advertising revenue to increase in the mid-single digits in the final quarter.

Adjusted operating costs came in at $363.7 million during the quarter, up 9.7% year over year on account of rise in marketing and commercial printing costs. Management now anticipates adjusted operating costs to increase in the mid-single digits.

Total adjusted operating profit declined 0.7% to $53.7 million as growth in digital subscription, digital advertising and other revenues was offset by increased adjusted operating costs.

Other Financial Aspects

The New York Times Company ended the quarter with cash and marketable securities of about $794.5 million, and total debt and capital lease obligations of approximately $252.8 million. The company incurred capital expenditures of about $15 million during the quarter. Management envisions capital expenditures of $60 million for 2018.

Wrapping Up

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.

The New York Times Company’s pricing system for NYTimes.com. The company notified that the number of paid digital subscribers reached 3,095,000 at the end of third-quarter 2018 – rising 203,000 sequentially and 24.4% year over year.

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.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -19.74% due to these changes.

VGM Scores

At this time, New York Times has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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

New York Times has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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