Scripps Networks Interactive, Inc.(SNI) reported robust first quarter 2011 financial results, where both revenue and earnings per share (EPS) exceeded the Zacks Consensus Estimate. The top-line growth was mainly attributable to higher advertising and affiliate fee revenue at the company’s flagship Lifestyle Media business coupled with an equally impressive performance at Interactive Services.
First Quarter Highlights
Quarterly consolidated revenue of $536 million was up 14.2% year over year, outpacing the Zacks Consensus Estimate of $522 million. Quarterly GAAP net income was $100.5 million or 59 cents per share compared with a net income of $72.5 million or 43 cents per share in the prior-year quarter. However, excluding one-time special items, EPS came in at 62 cents, easily beating the Zacks Consensus Estimate of 59 cents.
Consolidated costs and expenses were $298.8 million in the first quarter, up 1.6% year over year. Despite the rise in expenses, quarterly operating income rose 44.4% year over year to $207.3 million.
Agreements of Analysts
Of the 14 analysts covering the stock in the last 7 days, none revised their estimates for the second quarter of 2011. Similarly, for the third quarter of 2011, none of the 13 analysts revised their estimates.
For fiscal 2011 and fiscal 2012, out of the 18 analysts, none increased or decreased their estimates during the last 7 days.
The current Zacks Consensus EPS Estimate for the second quarter of 2011 is pegged at 72 cents. The projected annual growth rate is 22.15%. Similarly, for the third quarter, the current Zacks Consensus EPS Estimate of 67 cents indicates a gain of 14.08% year over year.
Magnitude of Estimate Revisions
For the second and third quarter of 2011, during the last 7 days, the current Zacks Consensus Estimate remained unchanged at 72 and 67 cents, respectively. Likewise, for fiscal 2011 and 2012, the current Zacks Consensus Estimate remained unchanged at $2.74 and $3.13 per share, respectively, in the last 7 days.
Earning Surprises
With respect to earnings surprises, the company has produced an average earnings surprise of 5.26% in the trailing four quarters. The ongoing quarter contains a downside potential of (essentially a proxy for future earnings surprises) 1.39% while the next quarter reflects 0.00% upside potential. For fiscal 2011, the upside potential is 0.73% but fiscal 2012 has a downside potential of 0.32%.
Our Recommendation
Despite stiff competition from other media companies like Discovery Communications Inc. (DISCA) and Crown Media Holdings, Inc. (CRWN), we believe both advertising revenue and affiliate fee revenue will remain healthy in the near term due to an improving U.S. economy.
We, thus, maintain our long-term neutral recommendation forScripps Networks. Currently, Scripps Networks has a Zacks#3 Rank, implying a short-term Hold rating on the stock.
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