Meredith Corporation (MDP) recently posted fourth-quarter 2011 results that exceeded the Zacks Consensus Estimate on the heels of healthy demand for non-political advertising at its Local Media groups, increased readership and online traffic, strength witnessed in Integrated Marketing and Brand Licensing, and effective cost management.
The quarterly earnings of 67 cents per share outpaced the Zacks Consensus Estimate of 65 cents but fell 5.6% from 71 cents delivered in the prior-year quarter. Management expects earnings in the range of 45 cents to 50 cents for the first quarter of fiscal 2012 and in the range of $2.40 to $2.80 per share for fiscal 2012.
However, on a reported basis, Meredith delivered earnings of 66 cents, down 9.6% from 73 cents posted in the prior year quarter.
Total revenue for the quarter dropped 3.1% year over year to $352.9 million, reflecting a 6.4% decline in total advertising revenue and a 7% fall in circulation revenue, partially offset by a 7.4% increase in other revenue. However, total revenue fell short of the Zacks Consensus Estimate of $357 million.
Operating expenses for the quarter fell by 2.4%.
Meredith’s National Media Group revenue dipped by 4.1% to $275.1 million, attributable to a 8.6% decline in advertising revenue and a 7% fall in circulation revenue partially offset 5.7% jump in other revenue. Management forecasts development in National Media Group advertising revenues, with modest decline in the first half of the fiscal 2012, while it is expected to register moderate growth during in the second half.
Further, management expects first-quarter 2012 magazine advertising revenues to go down in the mid-single digits, compared to the prior-year period on account of closure of two of the three issues.
EBITDA decreased marginally to $51.8 million with EBITDA margin expanding 70 basis points to 18.8%.
Local Media Group’s revenue grew marginally to $77.8 million. The modest 2.8% increase in non-political advertising revenue to $65.7 million was due to fall in the advertisements following the recent catastrophe in Japan. Political advertising revenue dropped to $738,000 from $3.9 million in the year-ago quarter.
Other revenues increased 22.3% during the reported quarter. Management hinted that non-political advertising revenue is down in the low-single digit in the first-quarter 2012.
EBITDA at Local Media Group was $25.4 million, down 3.8% from the prior-year quarter. While, EBITDA margin contracted 160 basis points to 32.7%.
Fiscal 2011 Highlights
According to the data collected from Mediamark Research and Intelligence, readership of Meredith magazines rose to 111 million. Monthly average unique visitors to the National Media Group websites increased substantially during the year.
The sluggish economy prompted Meredith to diversify and add significant revenue streams beyond traditional advertising by leveraging its brands through strategic alliances. Meredith Integrated Marketing revenue and Brand Licensing revenue supplemented the sales of the company, led by a rise in sales of Better Homes and Gardens' branded products at Wal-Mart Stores Inc (WMT), which now includes 3,000 SKUs.
Meredith in a strategic move announced the acquisition of EatingWell Media Group and launched Recipe.com.
EatingWell brings in an award-winning magazine with 350,000 circulation coupled with a popular website offering innovative ideas of cooking healthy meals, shopping tips and shares articles, blogs and nutrition advice to major customer portals and retail partners. The Recipe.com offers variety of recipes and savings coupon.
According to Meredith’s Chairman and CEO Steve Lacy, food remains the top advertising category of the company and the recent developments in food category will facilitate Meredith to better serve its 75 million women consumers through the strong multi-channel mechanisms of these companies to meet the ever increasing demand.
Further, the move is accretive to Meredith as EatingWell's major portion of revenue comes from licensing, digital sources and custom marketing and Recipe.com has noteworthy digital and mobile trail, thus spreading its reach to a larger number of consumers in America.
Moreover, Meredith goes ahead with its digital initiatives as its launched tablet editions of Better Homes and Gardens, Parents and Fitness and many more. Further, the company also launched many mobile applications for increasing its visibility.
Other Financial Details
Meredith ended the quarter with cash and cash equivalents of $27.7 million, total long-term debt of $195 million and shareholders’ equity of $775 million. During fiscal 2011, the company lowered its total debt load by $105 million. The company generated net cash flows from operating activities of $214.5 million during the year. The company’s leverage ratio (debt to EBITDA) was less than 1 to 1 at June 30, 2011.
Free cash flow increased 10.6% to $184.6 million from $166.9 million in fiscal 2011 coupled with a dividend increase of 11% during the year. The company repurchased approximately 770,000 shares and has approximately 550,000 shares remaining under its current repurchase authorization at June 30, 2011.
Currently, we maintain a long-term Neutral on the stock. Moreover, Meredith holds a Zacks #4 Rank, which translates into a short-term Sell rating.
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