The New York Times Company (NYT), one of the leading diversified media company, is scheduled to report its second-quarter 2011 financial results on July 21, 2011. The current Zacks Consensus Estimate for the quarter is 10 cents a share. For the quarter under review, the Zacks Consensus Estimate projects the revenues to be $579 million.
First-Quarter 2011, a Synopsis
The New York Times Company posted lower-than-expected first-quarter 2011 results, reflecting sagging advertising and circulation revenues. The quarterly earnings of 2 cents a share missed the Zacks Consensus Estimate by a penny, and dropped substantially from 11 cents earned in the prior-year quarter.
On a reported basis, including one-time items, the company posted quarterly earnings of 4 cents per share, down 50% from 8 cents delivered in the year-ago quarter.
The company registered a drop in top line during the quarter. After sliding 2.9% in the fourth quarter of 2010, total revenue slipped 3.6% to $566.5 million in the quarter under review from the prior-year quarter, and also fell short of the Zacks Consensus Estimate of $570 million.
Second-Quarter 2011 Zacks Consensus
Analysts considered by Zacks, expect NY Times to post second-quarter 2011 earnings of 10 cents a share. The current Zacks Consensus Estimate reflects a decline of 44.4% from the prior-year quarter earnings. The current Zacks Consensus Estimate for the quarter ranges between 9 cents and 12 cents.
Zacks Agreement & Magnitude
Of the 4 analysts following the stock, 1 analyst revised the estimates upwards in the last 30 days, having no impact on the Zacks Consensus Estimate for second-quarter 2011. In the last 7 days, none of the analysts have revised their estimates, keeping the Zacks Consensus Estimate constant.
Mixed Earnings Surprise History
With respect to earnings surprises, NY Times has topped as well as missed the Zacks Consensus Estimate over the last four quarters in the range of negative 33.3% to positive 40.0%. The average remained at 17.6%. This indicates that the company has beaten the Zacks Consensus Estimate by an average of 17.6% in the last four quarters.
Our View
The publishing industry has long been grappling with sinking advertising revenue and the recent global economic meltdown has worsened the situation. This downturn followed a longer-term secular decline as more readers choose to get news online for free, making the print-advertising model increasingly redundant. Moreover, the ad rates of print are more expensive than web.
The company is adding diverse revenue streams, including a circulation pricing model, and a “pay-and-read” model for NY Times.com, to make it less susceptible to the economic conditions. The company is also adapting to the changing facet of the multiplatform media universe, which currently includes mobile, social media networks and reader application products in its fold.
The company recently announced to prepay one of its largest financial obligations. Management stated that the move will result in savings of approximately $39.0 million annually through January 15, 2015. However, the company has to bear a one-time loss of $46.0 million in the third quarter of fiscal 2011.
NY Times has been taking prudent steps to improve the company's financial flexibility. The company sold its 55.7% stake in Fenway Sports Group. The deal is expected to provide New York Times a pre-tax gain of $64.0 million in the third quarter of fiscal 2011 and will be accretive to the top line, while managing its debt better.
New York Times, which faces competition from News Corp. (NWSA) and The Washington Post Company (WPO), currently retains a Zacks #3 Rank, which translates into a short-term 'Hold' rating. Our long-term recommendation on the stock remains 'Neutral'.
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