Healthy demand for non-political advertising at Meredith Corporation’s (MDP) Local Media groups, increasing readership and online traffic and effective cost management have been benefiting the company’s top- and bottom-line results.
Meredith is one of the leading media and marketing companies engaged in publishing, broadcasting, integrated marketing and interactive media. The company boasts of a strong portfolio of women’s magazines with a relatively stable circulation, which has helped it to gain market share.
After registering growth in the first half of fiscal 2011, print and online advertising revenues tumbled 11% during the third quarter, reflecting industry wide softness in the Food & Beverage, DTC & Non-DTC Pharmaceuticals and Home categories.
Meredith has been working diligently to explore and add alternative revenue generating opportunities for reducing its dependence on traditional advertising by entering into strategic alliances. These include the expansion of its integrated marketing offers, video related operations, brand licensing, and mobile initiatives.
Marketing revenue climbed 8%, whereas Brand Licensing revenue surged 15%, driven by a rise in sales of Better Homes and Gardens’ branded products at Wal-Mart Stores Inc. (WMT). Management now expects earnings in the range of 60 cents to 66 cents for the fourth quarter and in the range of $2.72 to $2.78 per share for fiscal 2011.
The company has been taking initiatives to enhance its online presence. These include the acquisition of online marketing firms – Genex, New Media Strategies, and Healia, and a mobile marketing firm – The Hyperfactory. Meredith also launched Meredith Women’s Network covering mostly women-related topics. Monthly average unique visitors to the National Media Group websites were approximately 22 million, while monthly page views averaged 250 million.
However, more than half of Meredith’s revenue comes from advertising depending on the health of the economy. An economic downturn stunts advertising demand. Although the economy is gradually regaining pace, publishing and broadcasting revenues still remain susceptible to changes in advertising demand.
Consequently, we maintain a long-term ‘Neutral’ on the stock. Moreover, Meredith holds a Zacks Rank #3, which translates into a short-term ‘Hold’ rating.
MEREDITH CORP (MDP): Free Stock Analysis Report
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