NY Times (NYT) Q3 Earnings Top, Digital Subscribers Rise

The New York Times Company NYT posted fifth straight quarter of positive earnings surprise, when it reported third-quarter 2017 results. The company delivered adjusted earnings from continuing operations of 13 cents a share that came ahead of the Zacks Consensus Estimate of 9 cents and more than doubled from the year-ago quarter. The newspaper publisher's total revenue of $385.6 million rose 6.1% year over year but fell short of the Zacks Consensus Estimate of $388 million.

The company’s positive earnings surprise streak and increase in digital subscribers have helped propelled the stock. In fact year to date, the stock has surged 43.6% and has comfortably outperformed the industry that gained 15.4%.

The quarter witnessed an increase in digital advertising and subscription revenues but a decline in print advertising revenue.

Let’s Delve Deep

Subscription revenue grew 13.6% to $246.6 million, primarily due to increase in the number of subscriptions to the digital-only products and a rise in the home delivery price of The New York Times. Revenue from digital-only subscriptions jumped 46.3% to $85.7 million. Management now projects total subscription revenue in the fourth quarter to increase in the high-teens.

Total advertising revenue came in at $113.6 million in the reported quarter, down 9% year over year. In the preceding quarter, total advertising revenue had inched up 0.8%. However, print advertising revenue fell 20.1% to $64.4 million in the quarter under review, following a decline of 10.5% in the preceding quarter.

Digital advertising revenue surged 11% to $49.2 million, after witnessing an increase of 22.5% in the preceding quarter. Higher digital advertising revenue came on the back of rise in revenues from mobile platform, programmatic buying channels and branded content, partly offset by a fall in traditional website display advertising.

The company on one end saw an 11.4% fall in the display advertising category, while on the other end it witnessed a 9.8% jump in the classified and other advertising category. The diversified media conglomerate hinted that total advertising revenue in the final quarter is likely to decline in the high single-digits.

Adjusted operating costs came in at $329.2 million during the quarter, up 1.5% year over year. Management now anticipates adjusted operating costs to increase in the high-single digits in the fourth quarter. Total adjusted operating profit grew 44.1% to $56.5 million.

Other Financial Aspects

The New York Times Company ended the quarter with cash and marketable securities of about $822.9 million, and total debt and capital lease obligations of approximately $249.4 million. The company incurred capital expenditures of about $39 million during the quarter. Management envisions capital expenditures in the band of $90-$95 million for 2017.

Wrapping Up

Advertising, which remains a significant source of revenue, is largely dependent on the global financial health. Softness in advertising demand has been weighing on The New York Times Company’s performance. Consequently, the company is trying in every way to shield itself from the impact of an unstable market and contemplating on new avenues of revenue generation. The company had offloaded assets that bear no direct relation to its core operations in order to re-focus on core newspapers and pay more attention to online activities.

The New York Times Company has been adding diverse revenue streams, such as a pay-and-read model, to stay less vulnerable to economic conditions. The company is also adapting to the changing face of the multiplatform media universe, and has already included mobile and reader application products in its portfolio. Other publishing companies such as New Media Investment Group Inc. NEWM, Gannett Co., Inc. GCI and The McClatchy Company MNI are also trying to adapt to different revenue generating ways.

Despite hiccups in the economy, what still promises revenue generation is The New York Times Company’s pricing system for NYTimes.com, which was launched on Mar 28, 2011. The company notified that the number of paid digital subscribers reached 2,487,000 at the end of the reported quarter – rising 154,000 sequentially and 59.1% year over year.

The New York Times Company remains committed to streamlining cost structure, strengthening balance sheet and rebalancing portfolio.

The New York Times Company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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