NY Times (NYT) Down 1.1% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for The New York Times Company NYT. Shares have lost about 1.1% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is NYT due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

NY Times Q1 Earnings Beat, Digital Subscribers Rise

NY Times posted seventh straight quarter of positive earnings surprise, when it reported first-quarter 2018 results. The company delivered adjusted earnings from continuing operations of 17 cents a share that beat the Zacks Consensus Estimate by a couple of cents and jumped 70% from the year-ago quarter. The newspaper publisher's total revenue of $413.9 million rose 3.8% year over year, and came ahead of the Zacks Consensus Estimate of $408.5 million.

The company’s positive earnings surprise streak and increase in digital subscribers have helped propelled the stock. The stock has surged roughly 58% in a year and outperformed the industry that gained 33.7% in the same time frame.

Let’s Delve Deep

Subscription revenue grew 7.5% to $260.6 million, primarily due to increase in the number of subscriptions to the digital-only products. Revenue from digital-only subscriptions products surged 25.8% to $95.4 million. Management now projects total subscription revenue in the second quarter of 2018 to increase in the mid-single digits.

Total advertising revenue came in at $125.6 million in the reported quarter, down 3.4% year over year. In the preceding quarter, total advertising revenue had declined 1.3%. Total advertising revenue in the second quarter is projected to decline in the low-teens.

Print advertising revenue fell 1.8% to $78.9 million in the quarter under review, following a decline of 8.4% in the preceding quarter. Notably, the rate of decline has decelerated sharply and is the best performance since third-quarter 2015.

Digital advertising revenue declined 6% to $46.7 million, after witnessing an increase of 8.5% in the preceding quarter. This reflects fall in traditional website display advertising, partially offset higher smartphone advertising revenue. Management expects digital advertising revenue to remain soft during the second quarter as well but expects the same to improve considerably in the third quarter.

Adjusted operating costs came in at $358.5 million during the quarter, up 2.8% year over year. Management now anticipates adjusted operating costs to rise in the mid-single digits in the second quarter. Total adjusted operating profit grew 10.4% to $55.5 million.

Other Financial Aspects

NY Times ended the quarter with cash and marketable securities of about $749.3 million, and total debt and capital lease obligations of approximately $251.1 million. The company incurred capital expenditures of about $19 million during the quarter. Management envisions capital expenditures in the band of $60-$70 million for 2018.

Wrapping Up

NY Times has been trying to shield itself from dwindling print advertising. 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 company has been adding diverse revenue streams, such as a pay-and-read model. 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.

Despite hiccups, what still promises revenue generation is NY Times’ pricing system for NYTimes.com. The company notified that the number of paid digital subscribers reached 2,783,000 at the end of the reported quarter – rising 139,000 sequentially and 25.5% year over year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

The New York Times Company Price and Consensus

 

The New York Times Company Price and Consensus | The New York Times Company Quote

VGM Scores

At this time, NYT has a great Growth Score of A, though it is lagging a lot on the momentum front with a D. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, NYT has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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