Scripps Networks Q2 Earnings Miss Estimates, Revenues Beat

Scripps Networks Interactive Inc. (SNI) reported better-than-expected financial results for the second quarter of 2014. Quarterly GAAP net income stood at $153.8 million or $1.07 per share compared with $159.7 million or $1.07 per share in the prior-year quarter. However, adjusted earnings per share of $1.14 missed the Zacks Consensus Estimate by a penny. Meanwhile, quarterly total revenue of $708.1 million increased 6.5% on an annualized basis and was also above the Zacks Consensus Estimate of $643 million.

The second-quarter gross profit came in at $517.9 million against $496.4 million in the prior-year quarter. Quarterly gross margin stood at 73.1% compared with 74.6% in the year-ago quarter. Quarterly operating income fell 2.1% year over year to $283.5 million. Operating margin, in the reported quarter, was 40% against 43.5% in the prior-year quarter. Also, Scripps Networks repurchased 4 million shares for a consideration of $300 million.

During the second quarter of 2014, Scripps Networks generated $99.6 million of cash from operations compared with $160 million in the year-earlier quarter. Free cash flow, in the reported quarter, was $80.9 million against $141.4 million in the prior-year quarter.

At the end of the quarter under review, Scripps Networks had $202 million in cash & marketable securities and $499.7 million of outstanding debt on its balance sheet compared with $686.4 million and $1,384.5 million, respectively, at the end of 2013. The debt-to-capitalization ratio stood at 0.19 versus 0.36 at the end of 2013.

Lifestyle Media Segment

Quarterly revenues came in at $684.5 million, reflecting an annualized growth of 6.1%. Within this segment, Advertisement revenues climbed 6.5% year over year to $485.8 million. Network Affiliate fee revenues were $187.5 million, up 4.1% year over year. Other revenues increased 25.2% year over year to $11.3 million. Total segment profit was $319.3 million, nearly flat year over year.

Brand wise, HGTV revenues were approximately $246.6 million, up 6.8% year over year. Food Network revenues came in at $238 million, reflecting a 6.4% hike year over year. Travel Channel revenues totaled $85.2 million, up 1.6% year over year. DIY Network revenues were $43.2 million, up 12% year over year. Cooking Channel revenues were $32.2 million, up 13.1% year over year. Great American Country revenues stood at $7.8 million, up 11.9% year over year. SN Digital revenues fell 5.3% year on year to around $27.1 million. Other revenues totaled $4.5 million, up 7.5% year over year.

Corporate Segment

Quarterly total revenue of $25 million was up 26.1% year over year. On the other hand, operating loss in the segment came in at $43.2 million, wider 63.8% year over year.

Other Stocks to Consider

Scripps Networks currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the media industry which warrant a look include CTC Media, Inc. (CTCM), Cumulus Media Inc. (CMLS) and Gray Television Inc. (GTN). All three stocks have a Zacks Rank #2 (Buy).