The Madison Square Garden Company (MSG) posted mixed fiscal second-quarter 2015 results, wherein Earnings missed the Zacks Consensus Estimate, but revenues beat the same. Shares of the company rose 2.2% in response to the revenue growth.
Adjusted earnings of 61 cents per share missed the Zacks Consensus Estimate of 73 cents by 16.4%, possibly due to higher expenses. Adjusted earnings excluded the gain from the Fuse Network sale.
Further, adjusted earnings plunged 21% year over year.
The company’s GAAP earnings of 78 cents, increased 1.3% year over year.
Net revenue of $542.5 million beat the Zacks Consensus Estimate of $530 million by 2.4% and increased 6.5% year over year. Revenues benefited primarily from higher MSG Entertainment and MSG Sports segments revenues, partially offset by a decline in the MSG Media revenues.
Behind the Headline Numbers
The company is engaged in sports, entertainment, and media businesses and operates mainly under three segments: MSG Media, MSG Entertainment and MSG Sports.
The MSG Entertainment segment generated revenues of $194.1 million, up 19% year over year. Revenues benefitted from the positive impact of higher event-related revenues at the Forum, the Madison Square Garden Arena and The Chicago Theatre, an increase in revenues for the Radio City Christmas Spectacular franchise, and higher venue-related sponsorship and signage and suite rental fee revenues. These positives were partially offset by lower event-related revenues at Radio City Music Hall.
MSG Sports segment revenues were $202.5 million, up 10% year over year, gaining from the Madison Square Garden Arena which remained open throughout the quarter. Further, higher professional sports team pre/regular season ticket-related revenues, suite rental fee revenues, inter-segment broadcast rights fees, professional sports team pre/regular season food, beverage and merchandise sales, and professional sports team sponsorship and signage revenues contributed to the increase.
Revenues at the MSG Media segment declined 8% year over year to $166.2 million. The decline reflects the absence of revenues from the Fuse network.
Operating income increased 43.3% from the prior-year quarter to $138.3 million, mainly due to higher revenues. However, selling, general and administrative expenses increased 5.5% year over year, due to higher expenses in the MSG Sports segments, partly offset by a decline in the MSG Media segment.
Adjusted operating cash flow (AOCF) increased 18% year over year to $149.8 million, due to improved AOCF in all three of the company's business segments, partly offset by an increase in unallocated corporate expenses.
Financial Update
As of Dec 31, 2014, cash and cash equivalents were $378.9 million, up from $320.8 million as of Sep 30, 2014. As of Dec 31, 2014, total liabilities and stockholders' equity were $3.1 billion, in line with the prior quarter.
Other Events
In Oct 2014, Madison Square Garden’s board unanimously approved a possible spin-off of its entertainment businesses from its media and sports unit. The spin-off would create two publicly traded companies. (Read More: Madison Square to Consider Spinoff Plan, Shares Up 11%).
Madison Square Garden presently sports a Zacks Rank #1 (Strong Buy). Other favorably-ranked stocks in the same sector include Carnival Corporation (CCL), Royal Caribbean Cruises Ltd. (RCL) and Live Nation Entertainment, Inc. (LYV). All these stocks have a Zacks Rank #2 (Buy).
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