Meredith Corporation MDP has been in investors’ good books for a while now. In fact, the company has been riding high on its strategic acquisitions, robust initiatives and impressive earnings surprise history.
Shares of this Zacks Rank #2 (Buy) company have gained 25.5% in the last three months, outperforming the Zacks Publishing-Periodicals industry’s growth of 18.2%. The industry currently ranks in the top 10% (26 out of 256) of the Zacks Classified industries. Also, the stock has outpaced the broader Consumer Staples sector’s gain of 3.3%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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What’s Aiding the Stock?
Acquisitions – A Growth Driver
The recent gain in share price can be primarily attributed to the company’s decision to acquire Time Inc. TIME. Ever since, the company has announced the deal on Nov 27, the stock has gained nearly 13%. Management has agreed to buy all shares of Time Inc. for $2.8 billion in cash. This acquisition, which is expected to close in the first quarter of 2018, is likely to build a leading media company serving nearly 200 million Americans. The deal will bring together the strong television business as well as the trusted, premium multiplatform content creation, which will be capable of serving consumers and advertisers alike.
Meredith has been making strategic investments via acquisitions and partnership deals to expand the media portfolio. Some of the other important acquisitions include Turner’s broadcast assets WPCH in Atlanta, Shape magazine and the digital assets of Shape, Selectable Media, Natural Health, and Fit Pregnancy brands.
Further, Meredith integrated Shape with its Fitness magazines and also revamped few magazines in its portfolio.
Other Driving Catalysts
Meredith’s strategic initiatives particularly in digital space, brand licensing activities and a solid portfolio of television stations reinforce its position as one of the leading media and marketing companies. Additionally, the company is generating significant retransmission revenues. Going forward, it remains optimistic about generating solid non-political adverting revenues in Local Media Group attributable to robust demand for automotive and professional services.
Meanwhile, the company has been renewing or extending its affiliation agreements with other well-established media players. Apparently, CBS Corporation’s CBS Local Media Group had renewed affiliation agreements till fiscal 2021 for stations in Atlanta, Phoenix, Kansas City and Flint/Saginaw. Also, it extended agreement for Twenty-First Century Fox, Inc. FOX affiliations in Portland, Las Vegas, Greenville, Mobile and Springfield till fiscal 2019. Furthermore, the deal with CBS Corp. includes the distribution through the Hulu’s live multi-channel digital television service. These initiatives are likely to widen Meredith’s reach and boost performance.
Robust Earnings History
Meredith also has to its credit an impressive earnings surprise history. The company’s earnings have outpaced the Zacks Consensus Estimate in 15 of the 16 trailing quarters. Additionally, the stock has pulled off an average positive earnings surprise of 7.1% in the last four quarters.
Impressively, the company has a long-term earnings growth rate of 8% which fared better than its industry’s growth rate of 5.9%.
Bottom Line
Meredith is not fully immune to the hurdles/concerns. Waning print media trends due to shift from traditional advertising and stiff competition continue to pose concerns. Although the company is expanding its digital presence, it will take time to complete the metamorphosis.
All said, we believe Meredith will surely overcome the hurdles and remain as investors’ favorite.
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