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Madison Square Garden's (MSG) Q2 Earnings Top Estimates

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The Madison Square Garden Company (MSG - Free Report) reported mixed second-quarter fiscal 2020 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. Following the release, the company’s shares dropped 1.6% on Feb 7.

The company reported adjusted earnings of $3.93 per share, which beat the Zacks Consensus Estimate of $2.41 by 63.1%. Also, the figure increased from the year-ago quarter’s earnings of $3.42 by 14.9%.

Revenues during the quarter totaled $628.8 million, which missed the consensus mark of $640 million by 1.7%. Also, the top line dropped 0.5% year over year. The decline was primarily caused by dismal performance in the Entertainment segment

The Madison Square Garden Company Price, Consensus and EPS Surprise

 

The Madison Square Garden Company Price, Consensus and EPS Surprise

The Madison Square Garden Company price-consensus-eps-surprise-chart | The Madison Square Garden Company Quote

 

Segmental Performance

Revenues in the Entertainment segment totaled $312.7 million, down 1.2% year over year. The downside was caused by fall in event-related revenues at the company's venues. The winding down of Obscura Digital’s third-party business and the expiration of the booking agreement with the Wang Theatre, impacted the segment’s revenues. However, the declines were partially offset by higher event-related revenues from other events — Tao Group Hospitality and the Christmas Spectacular Starring the Radio City Rockettes production.

The segment’s adjusted operating income amounted to $103.6 million compared with operating income of $101 million in the prior-year quarter. The metric improved primarily owing to decline in direct operating as well as selling, general and administrative expenses. The decline in operating expenses were due to lower concert-related expenses and lower Obscura Digital costs, partially offset by higher event-related expenses from other live events along with increased employee compensation and related benefits.

Revenues in the Sports segment inched up 0.2% year over year to $316.5 million, courtesy of growth in revenues from league distributions and local media rights fees from MSG Networks Inc. However, the gain was partially overshadowed by a decrease in sponsorship and signage revenue.

The segment’s adjusted operating income amounted to $55.3 million compared with operating income of $48.6 million in the prior-year quarter. The upside can be primarily attributed to decline in direct operating expenses, owing to fall in net provisions for certain team personnel transactions. This was partially offset by higher team compensation, revenue sharing and luxury tax expenses as well as other team operating expenses.

Corporate and Other

For second-quarter fiscal 2020, adjusted operating loss for Corporate and Other’s was reported at $31.9 million compared with $19.2 million reported in the year-ago quarter. The loss was primarily caused by higher expenses related to the MSG Sphere initiative, which includes — personnel, content development and technology costs as well as expenses related to the proposed spin-off the Company's Entertainment business. This was partially offset by a fall in employee compensation and related benefits in Corporate.

Operating Income

In the quarter under review, Madison Square Garden reported adjusted operating income of $126.9 million compared with operating income of $130.4 million in the year-ago quarter.

Balance Sheet

Cash and cash equivalents totaled $1,000.1 million as of Dec 31, 2019 compared with $1,086.4 million as of Jun 30, 2019. The company ended the fiscal second quarter with long-term debt of nearly $31.2 million compared with $48.6 million at the end of Jun 30, 2019.

Other Development

The company has made significant progress on its state-of-the-art entertainment venue — MSG Sphere at The Venetian. Relative to the company's current cost estimate, actual construction costs for MSG Sphere at The Venetian incurred through December 31, 2019 were approximately $248 million. The company expects to open MSG Sphere at The Venetian by 2021
 
Zacks Rank & Other Key Picks

Madison Square Garden has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Few top-ranked stocks in the Zacks Consumer Discretionary sector include Sonos, Inc. (SONO - Free Report) , Gray Television, Inc. (GTN - Free Report) and WW International, Inc (WW - Free Report) . Sonos and Gray Television sport a Zacks Rank #1, while WW International carries a Zacks Rank #2.

Sonos 2020 earnings are expected to rise 40%

Gray Television has trailing four-quarter positive earnings surprise of 66%, on average

WW International has three-five year expected earnings per share growth rate of 15%.

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