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Why Is Meredith Corporation (MDP) Up 6.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Meredith Corporation (MDP - Free Report) . Shares have added about 6.4% in that time frame, outperforming the S&P 500.

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

Meredith's Earnings & Revenues Increase Y/Y in Q2

Meredith Corporation came out with second-quarter fiscal 2019 results, wherein earnings and revenues grew year over year. Results gained form robust performances in both National and Local Media Group. Also, strong demand for political advertising in Local Media Group along with proceeds from sale of non-strategic assets and reduced debt contributed to the quarterly results. Moreover, management reiterated its fiscal 2019 view, while it provided guidance for the third quarter.

Q2 Highlights

Meredith’s adjusted earnings per share increased almost two-folds to $2.55 from $1.34 in the prior-year quarter. Earnings from continuing operations came in at $140 million in the reported quarter, down from $61.4 million in the prior-year period.

Meredith’s total revenues surged more than doubled $854 million from $417.7 million recorded in the prior-year period.

The company’s advertising revenues jumped more than two folds to $488.9 million from $231.8 million in the year-ago quarter. Meanwhile, consumer-related revenues surged to $336.8 million in the fiscal second quarter from $151.7 million in the year-ago period. However, other revenues decreased 18.7% to $27.8 million.

Adjusted EBITDA came in at $230.5 million, which increased more than double from $84.5 million in the prior-year period. Adjusted EBITDA margin expanded 680 basis points from the prior-year period to 27%.

Segment Details

Meredith’s National Media Group revenues surged to a whopping $591.3 million from $247.4 million in the year-ago period. This upside was driven by more than two-fold jump in both advertising and consumer-related revenues to $303 million and $262.7 million, respectively. However, growth was somewhat offset by a decline of 22.2% in the segment’s other revenues. The segment’s adjusted EBITDA totaled $130.6 million compared with $38.8 million in the prior-year quarter.

Revenues at the company’s Local Media Group segment ascended 54.1% to $262.4 million. The improvement was driven by significant increase in political spot advertising revenues, which summed $65.8 million compared with $2.1 million in the year-earlier quarter. Also, non-political advertising revenues were up 15.7% to $120.3 million. The segment’s adjusted EBITDA came in at $116.2 million that increased two folds from the year-ago period.

Financial Update

The company ended the quarter with cash and cash equivalents of $77.1 million, long-term debt of $2,507.4 million and total shareholders’ equity of $1,055.7 million. The company still has $53 million remaining under its share repurchase plan as of Dec 31, 2018.

Management is on track to lower debt by $1 billion, by the end of fiscal 2019.  As part of this, the company has already lowered debt by $700 million so far in fiscal 2019. Hence, it targets achieving a net debt-to-EBITDA ratio of 2.0 to 1 or better, by fiscal 2020 end. Notably, the company anticipates EBITDA of $1 billion and net debt to be lower than $2 billion by the end of fiscal 2020.

Meredith has hiked its quarterly dividend by 5.5% to $2.30 on Feb 2, 2019, marking the 26th straight year of dividend hike.

Other Developments

Post the acquisition of TIME, Inc., the company witnessed improvement in its advertising revenues during the quarter and expects this uptick to continue throughout fiscal 2019. Additionally, Meredith has realized $500 million of cost savings it expected within the first two full years of combined operations.

Meredith has also sold Fortune media for $150-million cash in a deal that was closed on Dec 21, 2018. Apart from this, the company intends to sell Sports Illustrated, MONEY brands and its 60% stake in Viant Brands in fiscal 2019. Also, the company’s consumer-related revenues came in at more than $336 million, accounting for 39.5% of total revenues.

Further, Meredith renewed its licensing deal with Walmart during the quarter, which now extends till fiscal 2021. The deal involves more than 3,000 SKUs of Better Homes & Gardens branded products at 4,000 Walmart stores in the United States, Walmart.com, Jet.com and Hayneedle.com.

Moreover, Meredith entered into deals related to extension of the affiliation for its five FOX television stations till July 2022. The company also inked multi-year deals with Comcast and Cox Communications for broadcasting television stations.

FY19 Outlook

Management has reiterated its fiscal 2019 guidance, wherein it expects total revenues of $3-$3.2 billion. Further, adjusted EBITDA is still expected between $720 million and $750 million.

The company expects adjusted earnings from continuing operations to be $205-$225 million for the fiscal. Consequently, earnings per share from continuing operations are still envisioned to be $2.78-$3.20 compared with $3.25 in fiscal 2018.

Q3 Guidance

Meredith expects total revenues to be $715-$735 million in third-quarter fiscal 2019. Revenues at National Media Group are projected to be $530-$540 million. For Local Media Group, revenues are expected to be $185-$195 million.

Moreover, earnings from continuing operations are expected to be $29-$36 million and adjusted earnings per share is projected to be $1.25-$1.41. Management expects adjusted EBITDA for fiscal third quarter to be $145-$155 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.




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