We have maintained our long-term Neutral recommendation on Meredith Corporation (MDP) with a target price of $51.00.
Why the Reiteration?
Meredith boasts a strong portfolio of women’s magazines, which helps it secure market share.
The company remains focused on bolstering advertising revenues, primarily in the digital space and is laying more emphasis on brand licensing, marketing services and e-Commerce to make it less susceptible to economic downturns. Meredith’s most recent attempt to enhance its television portfolio could be witnessed in Dec 2013 when it entered into a deal to acquire television stations in Phoenix and St. Louis from Gannett Co., Inc. (GCI) and Sander Media LLC.
The deal, which is expected to conclude in the first half of calendar year 2014, is the latest among several strategic acquisitions made by Meredith. The company had earlier added Allrecipes.com; Every Day with Rachael Ray; FamilyFun; EatingWell; Parenting and BabyTalk to its portfolio.
Meredith is also a perfect bet for investors seeking both growth and income. The company through its TSR (Total Shareholder Return) strategy intends to boost shareholders’ value through dividends, share repurchases and strategic investments in business to drive growth.
The company has a strong history of making dividend payouts for 66 consecutive years. Over the last decade, the company has boosted its dividend at an average annualized rate of 16% and raised dividend annually for 20 straight years.
This Zacks Rank #2 (Buy) company, through strategic alliances leverages its brands, which supplement the sales of the company. Meredith extended its contract with Wal-Mart Stores Inc. (WMT), which includes expanding Better Homes and Gardens branded home decor and garden program at the latter’s stores across the United States and Canada.
We believe these measures will help the company reduce its dependency on traditional advertising and provide ample growth opportunities to increase its revenue generating capabilities, thereby driving profitability.
However, we are cautious about the stock’s prospects as persisting macroeconomic headwinds and higher dependence on traditional advertising revenue may subdue the company’s performance. Given the pros and cons of the stock, we reiterate our Neutral recommendation.
Another Stock to Consider
However, another better-ranked stock in the publishing sector includes Tribune Co. (TRBAA) with a Zacks Rank #1 (Strong Buy).
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