Scripps Networks Interactive Inc. (SNI) reported better-than-expected earnings in the fourth quarter of 2014. Earnings (on an adjusted basis) of $1.02 per share handily beat the Zacks Consensus Estimate of 94 cents and exceeded the year-ago figure by 13.3%.
Total revenue in the fourth quarter climbed 2.3% year over year to $669.2 million. Revenues, however, fell short of the Zacks Consensus Estimate of $683 million.
The fourth-quarter gross profit came in at $468.7 million against $465.8 million in the prior-year period. Quarterly gross margin stood at 70% compared with 69.1% in the year-ago quarter. Quarterly operating income (on a reported basis) climbed 6.4% year over year to $230.5 million.
Operating margin in the reported quarter was 34.4%, against 33.1% in the prior-year period. During the final quarter of 2014, the company bought back 5.1 million shares for $399 million. We are impressed by the company’s efforts to reward investors through share repurchases.
At the end of 2014, Scripps Networks had $878.2 million in cash & cash equivalents and $1,494.4 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 0.47 versus 0.36 at the end of 2013.
Results Segment Wise
Lifestyle Media Segment
Quarterly revenues came in at $642 million, up 1.7% on a year-over-year basis. Within this segment, Advertisement revenues grew a mere 0.3% year over year to $444 million. Revenues were hurt by the weakness in the advertising market and audience delivery at some of the company’s networks.
Affiliate fee revenues were $191 million, up 6.1% year over year. The improvement was driven by higher rates coupled with the benefit from the company’s online video distribution deals. Other revenues decreased 19.9% year over year to $7.3 million.
Brand wise, HGTV revenues were approximately $231.1 million, up 4.4% year over year. Food Network revenues came in at $219.7 million, reflecting a 1.1% hike year over year. Travel Channel revenues declined 2.9% year over year to $75.7 million. DIY Network revenues were $36.8 million, up 7% year over year.
Cooking Channel revenues were $31.8 million, up 9.8% year over year. Great American Country revenues stood at $7.7 million, up 16.9%. Digital revenues fell 2.6% year on year to approximately $7.5 million. Revenues from Digital businesses climbed 4.2% to $37.8 million. Other revenues totaled $3.5 million, up 4.9% year over year.
Corporate Segment
Quarterly total revenue of $27.3 million was up 18.3% year over year. Loss in the segment amounted to $36.2 million, 66% higher than the prior-year quarter. The wider segmental loss was due to restructuring costs and efforts undertaken by the company to expand.
2015 Guidance
The company expects 2015 revenues to increase 4% over the 2014 figure of $2.7 billion. Capital expenditure is projected in the range of $50 million to $60 million. Effective tax rate for 2015 is forecasted between 30% and 32%.
Zacks Rank
Scripps Networks currently has a Zacks Rank #3 (Hold). Better-ranked stocks include Nexstar Broadcasting Group, Inc. (NXST), Liberty Global (LBTYA) and Salem Communications Corp. (SALM). Nexstar Broadcasting Group sports a Zacks Rank #1 (Strong Buy) whereas Liberty Global and Salem Communications hold a Zacks Rank #2 (Buy).
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