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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 Beats on Q1 Earnings, Digital Subscribers Rise

The New York Times Company posted better-than-expected first-quarter 2019 bottom-line results and registered higher digital-only subscriptions. Digital advertising also improved significantly. This was the 11th straight quarter, when the company delivered positive earnings surprise, while revenues came almost in line with the Zacks Consensus Estimate after surpassing the same in the preceding five quarters.

The company delivered adjusted earnings from continuing operations of 20 cents a share that beat the Zacks Consensus Estimate of 12 cents and increased 17.6% from 17 cents recorded in the year-ago period. The newspaper publisher's total revenue of $439.1 million rose 6.1% year over year, and almost met the Zacks Consensus Estimate of $439.7 million.

Let’s Delve Deep

Subscription revenue grew 3.9% to $270.8 million principally due to increase in the number of subscriptions to the company’s digital-only products. Revenue from digital-only subscriptions products jumped 15.1% to $109.9 million. Management now projects total subscription revenue in the second quarter to increase in the low to mid-single digits, while digital-only subscription revenue is likely to rise in the mid-teens.

Total advertising revenue came in at $125.1 million in the reported quarter, down 0.4% year over year. In the preceding quarter, total advertising revenue had increased 5%. Total advertising revenue in the second quarter are expected to be approximately flat.

Print advertising revenue fell 11.9% to $69.5 million in the quarter under review, following a decline of 10.2% in the preceding quarter.

Digital advertising revenue surged 18.9% to $55.5 million, following an increase of 22.8% in the preceding quarter. Management expects digital advertising revenue to increase in the mid-teens during the second quarter.

Adjusted operating costs came in at $386.7 million during the quarter, up 7.9% year over year on account of rise in marketing expenses, labor and raw material costs from commercial printing and newsroom costs. Management now anticipates adjusted operating costs to increase around 8-10% in the second quarter. Total adjusted operating profit declined 5.6% to $52.4 million.

Other Financial Aspects

The New York Times Company ended the quarter with cash and marketable securities of about $808.8 million, and total debt and capital lease obligations of approximately $254.5 million. The company incurred capital expenditures of about $11 million during the quarter. Management envisions capital expenditures of $50-$60 million in 2019.

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 3,583,000 at the end of first quarter of 2019 – rising 223,000 sequentially and 28.7% year over year. The company has set a goal to reach more than 10 million subscriptions by 2025.

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.

VGM Scores

At this time, New York Times has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, 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 D. 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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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