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Meredith Beats Estimates

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Meredith Corporation (MDP - Free Report) recently posted first-quarter 2012 results that exceeded the Zacks Consensus Estimate on the heels of modest demand for non-political advertising at its Local Media groups, increased readership and online traffic and effective cost management.

The quarterly earnings of 48 cents per share outpaced the Zacks Consensus Estimate of 46 cents but fell 14.3% from 56 cents delivered in the prior-year quarter. Management expects earnings in the range of 65 cents to 70 cents for the second quarter of fiscal 2012.

For fiscal 2012, the company stood by its earlier guidance and expects earnings in the range of $2.40 to $2.80 per share.

Total revenue for the quarter dropped 4.3% year over year to $327.9 million, reflecting a 10% decline in total advertising revenue, partially offset by a 7% and 1% increase in other and circulation revenue. However, total revenue came ahead of the Zacks Consensus Estimate of $326 million.

Operating expenses for the quarter fell by 1.7%.

Segment Details

Meredith’s National Media Group revenue dipped by 3% to $258.6 million, attributable to a 8.2% decline in advertising revenue, partially offset by a 3.5% and 1% increase in other and circulation revenue revenue. Management expects second quarter 2012 National Media Group advertising revenue to decline in the range of 8% to 12%.

EBITDA decreased 8.4% to $39.4 million with EBITDA margin contracting 90 basis points to 15.2%.

Local Media Group’s revenue declined 8.8% to $69.3 million. Non-political advertising revenue increased 3% to $59.3 million. Political advertising revenue dropped sharply to $0.6 million from $11.6 million in the year-ago quarter. Other revenues increased 40.8% during the reported quarter. Management hinted that non-political advertising revenue is pacing up in the mid single-digit range in the second-quarter 2012.

EBITDA at Local Media Group was $17 million, down 24.8% from the prior-year quarter. While, EBITDA margin contracted 520 basis points to 24.6%.

Strategic Measures

It's been a constant endeavor of Meredith to explore and add alternate revenue generating channels through acquisitions or by entering into strategic alliances in order to reduce its dependence on conventional advertising.

Following its growth trajectory, Meredith reached an agreement with the Reader's Digest Association to acquire its award-winning magazine Every Day with Rachael Ray.

The publisher of Better Homes and Gardens and Family Circle, Meredith Corporation will also acquire the digital media assets related to the magazine.  The company added that it expects to close the deal this fall.

The buyout will broaden the reach of Meredith, while offering multiple avenues to advertisers. Food remains the top advertising category of the company and the recent developments in food category will facilitate Meredith to better serve its 75 million women consumers through strong multi-channel mechanisms for meeting the ever increasing demand.

According to the data collected from Mediamark Research and Intelligence, readership of Meredith magazines rose to 111 million. Monthly average unique visitors to the National Media Group websites increased substantially.

Meredith Enhances Value

Meredith in its attempt to optimize its shareholders’ return decided to employ its available free cash in raising its quarterly dividend and also approved a share buyback program.

The companyraised its annual dividend by approximately 50% to$1.53 from $1.02. The increased quarterly dividend will be paid on December 15, 2011 to stockholders of record as of November 30, 2011.

Additionally, the company also announced a $100 million share repurchase program. These strategies enhance shareholders’ return and boost the market value of the stock.

Other Financial Details

Meredith ended the quarter with cash and cash equivalents of $18.9 million, total long-term debt of $200 million and shareholders’ equity of $780.1 million. During last twelve months ending September 30, 2011, the company lowered its total debt load by $250 million. The company generated net cash flows from operating activities of $190 million and repurchased 1 million shares.

Currently, we maintain a long-term Neutral recommendation on the stock. Moreover, Meredith competes with Martha Stewart Living Omnimedia Inc. and has a Zacks #4 Rank, which translates into a short-term Sell rating.

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