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NY Times (NYT) Q3 Earnings Surpass Estimates, Decline Y/Y

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The New York Times Company NYT reported a positive earnings surprise in third-quarter 2019, following a miss in the preceding quarter. However, total revenues fell short the Zacks Consensus Estimate for the third quarter in row. While the top line sustained year-over-year improvement, bottom line declined from the year-ago period.

Notably, the company registered higher digital-only subscriptions during the quarter under review. Meanwhile, digital advertising revenues decreased but fared marginally better than the company’s expectation.

Management had earlier informed that the second half of 2019 is likely to be challenging for digital advertising. It now expects digital advertising to be “fairly challenging” in the fourth quarter as a result of comparisons with the prior-year period’s sturdy performance.

Shares of this Zacks Rank #4 (Sell) company fell almost 4% during the trading session on Nov 6. We note that the stock has fallen roughly 11% compared with the industry’s decline of 4% in the past six months.

Let’s Delve Deep

The company delivered adjusted earnings from continuing operations of 12 cents a share that came a penny ahead of the Zacks Consensus Estimate but fell 20% from the year-ago period. The newspaper publisher's total revenues of $428.5 million rose 2.7% year over year but came below the Zacks Consensus Estimate of $429.8 million.

Subscription revenues improved 3.7% to $267.3 million principally due to increase in the number of subscriptions to the company’s digital-only products. Revenues from digital-only subscriptions products (comprising news product, as well as Crossword and Cooking products) jumped 14.5% to $115.9 million. Management now projects total subscription revenues in the fourth quarter to increase in the low to mid-single digits, while digital-only subscription revenues are likely to rise in the mid-teens.

Total advertising revenues came in at $113.5 million in the reported quarter, down 6.7% year over year. In the preceding quarter, total advertising revenues rose 1.3%. Total advertising revenues in the fourth quarter are expected to decline in the mid-teens.

The New York Times Company Price, Consensus and EPS Surprise


The New York Times Company Price, Consensus and EPS Surprise

The New York Times Company price-consensus-eps-surprise-chart | The New York Times Company Quote

Print advertising revenues fell 7.9% to $58.9 million in the quarter under review, following a decline of 8% in the preceding quarter.

Digital advertising revenues decreased 5.4% to $54.7 million, following an increase of 13.7% in the preceding quarter. The fall in digital advertising revenues were due to reduce direct-sold advertising on core digital platforms, partly offset by growth in podcasts. Management now expects digital advertising revenues to fall in the in the mid-teens during the fourth quarter.

We note that other revenues soared 25.9% to $47.7 million during the quarter under review primarily due to revenues earned from television series, “The Weekly.” Management anticipates other revenues to increase in the band of 25-30% during the fourth quarter.

Adjusted operating costs rose 5.7% to $384.4 million during the quarter. This year-over-year increase was due to increased content costs, comprising rise in the number of newsroom staff and expenses associated to television series, “The Weekly,” and increased digital product development employees. This was partly offset by fall in print production and distribution costs.

Management now anticipates adjusted operating costs to increase in the low-single digits during the fourth quarter on account of sustained investment into growing digital subscription business. Total adjusted operating profit declined 17.9% to $44.1 million.

Other Financial Aspects

The New York Times Company ended the quarter with cash and marketable securities of about $877.9 million. The company incurred capital expenditures of about $9 million during the quarter. Management envisions capital expenditures of about $50 million in 2019.

Wrapping Up

The New York Times Company, which shares space with The McClatchy 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, as adopted by the company.

The company notified that the number of paid digital subscribers reached roughly 4,053,000 at the end of third-quarter 2019 – rising 273,000 sequentially and 31% year over year. The company has set a goal to reach 10 million total subscriptions by 2025.

Stocks to Consider

Roku, Inc. ROKU has a long-term earnings growth rate of 39.4%. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Discovery, Inc. DISCA has a long-term earnings growth rate of 19.2% and a Zacks Rank #2 (Buy).

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