Scripps Networks Interactive Inc. (SNI) reported financial results for the fourth quarter of 2013 where both its top and bottom line missed the respective Zacks Consensus Estimate. Higher service costs and marketing expenses have resulted in a drop in earnings.
Quarterly GAAP net income stood at $108.5 million or 73 cents per share compared with $305.8 million or $2.02 per share in the prior-year quarter. However, adjusted earnings per share of 90 cents missed the Zacks Consensus Estimate of 97 cents. Quarterly total revenue of $654.4 million increased 8.2% on an annualized basis, but lagged the Zacks Consensus Estimate of $656 million.
The fourth-quarter 2013 gross profit came in at $465.8 million against $438.8 million in the prior-year quarter. Quarterly gross margin was 71.2% compared with 72.6% in the year-ago quarter. Quarterly operating income decreased 1.1% year over year to $216.6 million. Operating margin, in the reported quarter, was 33.1% against 36.2% in the prior-year quarter.
During the fourth quarter of 2013, Scripps Networks generated $877.2 million of cash from operations compared with $614.7 million in the year-earlier quarter. Free cash flow, in the reported quarter, was $804.2 million against $551.3 million in the prior-year quarter.
At the end of the fourth quarter of 2013, Scripps Networks had $686.4 million in cash & marketable securities and $1,384.5 million of outstanding debt on its balance sheet compared with $437.5 million in cash & marketable securities and $1,384.2 million of outstanding debt at the end of 2012. At the end of the reported quarter, the debt-to-capitalization ratio stood at 0.39 compared with 0.43 at the end of 2012.
Lifestyle Media Segment
Quarterly revenues came in at $629.2 million, reflecting an annualized growth of 7.6%. Within this segment, Advertisement revenues climbed 7.1% year over year to $438.5 million. Network Affiliate fee revenues were $181.9 million, up 9% year over year. Other revenues increased 3.8% year over year to $8.8 million. Total segment profit was $273.3 million, up 2.8% from the prior-year quarter.
Brand wise, HGTV revenues were approximately $222.2 million, up 11% year over year. Food Network revenues came in at $222.9 million, up 3.9% year over year. Travel Channel revenues were $78.1 million, up 9.8% year over year. DIY Network revenues were $34.5 million, up 13.6% year over year. Cooking Channel revenues were $29.1 million, up 18.1% year over year. Great American Country revenues stood at $7.7 million, up 1.5% year over year. SN Digital revenues decreased 5% year on year to $31.5 million. Other revenues totaled $3.3 million, up 2.2% year over year.
Corporate Segment
Quarterly total revenue of $26 million was up 31.3% year over year. Operating loss in the segment was $29.1 million, up 34.8% year over year.
Guidance
Scripps Networks expects revenues for full-year fiscal 2014 to rise 6–8% while cost of service is expected to increase in the range of 11–13%. Likewise, selling, general and administrative cost is projected to remain flat or grow 2% year over year.
Other Stocks to Consider
Scripps Networks currently has a Zacks Rank #3 (Hold). Other stocks in the Media/Broadcast industry worth considering include Cumulus Media Inc. (CMLS), LIN TV Corp. (TVL) and Gray Television Inc. (GTN). All the three stocks currently carry a Zacks Rank #2 (Buy).
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