Publishing Stocks to Post Earnings on Jul 28: NYT, MDP, NEWM

Investors are keeping an eye as the Q2 earnings season has gained momentum, so far unveiling modest improvement compared to the last couple of quarters. Per the latest Zacks Earnings Trends report as of Jul 22, out of the 126 S&P 500 members that have come up with their quarterly numbers, approximately 70.6% have posted positive earnings surprises, while 55.6% beat top-line expectations.

According to the report, earnings for the 126 S&P 500 companies that have reported so far are down 1.1% from the same period last year, while revenues have dropped 2.6%.

The report further projects that earnings for the total S&P 500 companies will decline 3.4% from the year-ago period, and total revenue will dip 0.5%. We observe that this will be the fifth straight quarter, if the index witnesses a decline in earnings. Well, as the earnings season gets into full swing, the scenario would be much more prominent. So don’t be in a rush to count your chickens before they hatch.

The performance of the index is not restricted to a single sector, and of the 16 Zacks sectors, 9 are expected to witness an earnings decline in Q2, with Basic Materials, Industrial Products, Oil/Energy, Technology and Transportation being a big drag. The Consumer Staples sector also portrays a soft trend. Total earnings for the sector are expected to drop 3.7%; however, revenues are projected to increase marginally by 0.2%. Publishing forms part of the Consumer Staples sector.

Publishing Industry: A Synopsis

The U.S. publishing industry has long been grappling with sinking advertising revenues, and the global economic meltdown has only worsened the situation. The downturn in the publishing industry witnessed over the last few years aggravated, as print readership declined, with more readers opting for free online news, thereby making the print-advertising model increasingly irrelevant.

The publishing companies are transforming their business models to better position themselves in a multi-platform media universe. According to industry experts, publishing companies are focusing more on mobile devices, online advertising based on user experience and personalized content to lower their dependence on traditional advertising revenues. They are also streamlining their cost structure, strengthening their balance sheet and restructuring their portfolio.

Among publishing companies, The McClatchy Company MNI reported its second-quarter 2016 results on Jul 21. This newspaper publisher posted a loss of $1.89 per share that missed the Zacks Consensus Estimate of a loss of 54 cents by a wide margin. The company witnessed a 16.6% drop in print advertising revenues, while digital advertising revenues increased 4.4%.

Sneak Peek at Three Publishing Stocks

Among publishing stocks lined up to report, let’s take a sneak peek at three companies.

The New York Times Company NYT, a diversified media conglomerate, is slated to report second-quarter 2016 results on Jul 28. The company is diversifying its business, adding new revenue streams, strengthening its balance sheet and restructuring its portfolio. It had offloaded assets in order to re-focus on its core newspapers and pay more attention to its online activities. We believe these moves will have a favorable impact on the quarter to be reported.

However, advertising revenue remains an area of concern for the company. Total advertising revenue fell 6.8% year over year during the first quarter of 2016. Print advertising revenue declined 9% in the quarter, while digital advertising revenue dropped 1.3%. Management had earlier projected that total advertising revenue in the second quarter may decline at a rate equivalent to that experienced in the first quarter.

The New York Times Company carries a Zacks Rank #2 (Buy) with an Earnings ESP of 0.00%. The Zacks Consensus Estimate for the quarter is currently pegged at 12 cents. (Read: NY Times Q2 Earnings: What's in Store for the Stock?). The company has surpassed earnings expectations for seven straight quarters. Also, the average positive surprise over the trailing four quarters comes to 26.7%.

Meredith Corporation MDP, one of the leading media and marketing companies with interests in publishing, broadcasting, integrated marketing and interactive media, is slated to report fourth-quarter fiscal 2016 results on Jul 28. Management had earlier projected fourth-quarter earnings per share in the range of $1.01–$1.06. Also, it anticipates total revenue to increase in the low-to-mid-single digits.

Favorable advertising trends in the digital section and recent acquisitions continue to positively impact the company’s performance. Management is focused on bolstering advertising revenues, primarily in the digital space, and is increasingly concentrating on brand licensing, marketing services and eCommerce. However, with advancement in technology, the print media is on a decline. Shift to online is likely to put enormous pressure on Meredith’s magazine portfolio. Though the company is expanding its digital presence, it will take time to complete the metamorphosis.

Meredith carries a Zacks Rank #3 (Hold) with an Earnings ESP of 0.00%. The Zacks Consensus Estimate for the quarter stands at $1.04. In the previous quarter, the company posted a positive earnings surprise of 15%. Notably, it surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average earnings surprise of 5.8%. (Read: What's in the Cards for Meredith in Q4 Earnings?).

Another publishing stock, New Media Investment Group Inc. NEWM is scheduled to report second-quarter 2016 results tomorrow. This publisher of locally based print and online media in the U.S. has an Earnings ESP of 0.00% and a Zacks Rank #2. The Zacks Consensus Estimate for the quarter currently stands at 31 cents. In the trailing four quarters, the company outperformed the Zacks Consensus Estimate by an average of 17.7%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research