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Meredith (MDP) Surpasses Earnings & Sales Estimates in Q1


Meredith Corporation MDP came out with first-quarter fiscal 2019 results, wherein earnings and revenues beat the Zacks Consensus Estimate. Results were backed by robust demand for political advertising in Local Media Group along with improved comparable print advertising performance on a sequential basis and controlled expenses in National Media Group. Moreover, management reiterated its fiscal 2019 view, while it provided guidance for the second quarter.

Notably, this Zacks Rank #3 (Hold) stock has gained 8.2% in a year compared with the industry’s 3.3% growth.

Q1 Highlights

Meredith reported adjusted earnings per share of 65 cents, which fared far better than the Zacks Consensus Estimate of a loss of 32 cents but declined 5.8% year over year.

Earnings from continuing operations came in at $29.5 million in the reported quarter, down from $31.4 million in the prior-year period.

Meredith’s total revenues surged to $756.7 million from $392.8 million recorded in the prior-year period. Moreover, top line also came ahead of the Zacks Consensus Estimate of $747 million.

While advertising revenues jumped more than two folds to $422.7 million, consumer-related revenues more than doubled to $301.2 million in the fiscal first quarter. Also, all other revenues decreased 3.5% to $32.8 million.

Adjusted EBITDA came in at $142.8 million, more than double from the prior-year period, while adjusted EBITDA margin expanded 210 basis points from the prior-year period to 18.9%.

Meredith Corporation Price, Consensus and EPS Surprise

Meredith Corporation Price, Consensus and EPS Surprise | Meredith Corporation Quote

Segment Details

Meredith’s National Media Group revenues surged to a whopping $542.9 million from $239 million in the year-ago period. This upside was driven by more than two fold jump in both advertising and consumer-related revenues to $284.4 million and $227.9 million, respectively. However, this growth was somewhat offset by a decline of 6.4% in the segment’s other revenues for the quarter. The segment’s adjusted EBITDA totaled $87.4 million compared with $28.9 million in the prior-year quarter.

Revenues at the company’s Local Media Group segment ascended 39.4% to $214.4 million. The improvement was driven by a significant increase in political spot advertising revenues, which summed $36.1 million compared with $1.4 million in the year-earlier quarter. Also, non-political advertising revenues were up 17% to $102.8 million. The segment’s adjusted EBITDA came in at $77.4 million that increased 58.3% from the year-ago period.

Financial Update

Meredith ended the quarter with cash and cash equivalents of $144 million, long-term debt of $2,937.4 million and total shareholders’ equity of $1,079 million.

The company still has $54 million remaining under its share repurchase plan as of Sep 30, 2018.

This apart, management is on track to lower its debt by $1 billion, by the end of fiscal 2019. As part of this, the company anticipates to lower $300 million of debt during the second quarter. Hence, it targets achieving a net debt-to-EBITDA ratio of 2.0 to 1 or better, by fiscal 2020 end. Notably, the company anticipates EBITDA of $1 billion and net debt to be lower than $2 billion by the end of fiscal 2020.

Other Developments

Meredith has sold TIME media for $190-million cash in a deal that was closed on Oct 31, 2018. Also, the company’s consumer related sales came in at more than $300 million, accounting for 40% of total revenues.

FY19 Outlook

Management has reiterated its fiscal 2019 guidance, wherein it expects total revenues of $3-$3.2 billion. Further, adjusted EBITDA is still expected between $720 million and $750 million.

The company expects earnings from continuing operations to be $205-$225 million for the fiscal. Consequently, earnings per share from continuing operations are still envisioned to be $2.78-$3.20. Meredith delivered earnings per share of $3.25 in fiscal 2018. The Zacks Consensus Estimate for the fiscal is pegged at $3.75, which is likely to witness downward revisions in the coming days.

Q2 Guidance

Meredith expects total revenues to be $850-$870 million. Revenues at National Media Group are projected to be $600-$610 million. For Local Media Group, revenues are expected to be $250-$260 million, comprising $60-$65 million of political advertising revenues.

Moreover, earnings from continuing operations are likely to come between $78 million and $85 million. Management expects adjusted EBITDA for the fiscal second quarter to be $215-$225 million.

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