The New York Times Company (NYT), the publisher of The New York Times, the International Herald Tribune and The Boston Globe, is scheduled to report its third-quarter 2011 financial results before the bell on Thursday, October 20, 2011. The current Zacks Consensus Estimate for the quarter is 3 cents a share. The Zacks Consensus estimates revenue at $545 million for the quarter.
Second-Quarter 2011, a Synopsis
On July 21, 2011, The New York Times Company, posted better-than-expected second-quarter 2011 results. The quarterly earnings of 14 cents a share beat the Zacks Consensus Estimate of 10 cents, but dropped 22.2% from 18 cents earned in the prior-year quarter.
The quarter reflects a favorable response to the digital subscription packages, increase in digital advertising revenue at News Media Group, improvement in circulation revenue and fall in the attrition rate as subscribers to the New York Times’ print version are able to access content or articles online as well as on all applications of The Times for no additional charge.
The New York Times registered a drop in its top-line during the quarter but the rate of fall decelerated sequentially. After declining 3.6% in the first quarter, total revenue slipped 2.2% to $576.7 million in the quarter under review from the prior-year quarter, and also fell short of the Zacks Consensus Estimate of $579 million.
Third-Quarter 2011 Consensus
The analysts surveyed by Zacks, expect The New York Times Company to post third-quarter 2011 earnings of 3 cents a share. The current Zacks Consensus Estimate compares with 7 cents a share earned in the year-ago quarter.
With respect to earnings surprises, The New York Times Company has missed as well as topped the Zacks Consensus Estimate over the last four quarters in the range of negative 33.3% to positive 40%. The average remained at positive 15.5%. This suggests that The New York Times Company has beaten the Zacks Consensus Estimate by an average of 15.5% in the trailing four quarters.
Zacks Agreement & Magnitude
Of the 4 analysts following the stock, three analysts revised their estimates downward in the last 30 days that led to a drop in the Zacks Consensus Estimate to 3 cents from 6 cents a share. In the last 7 days, none of the analysts revised their estimates thereby keeping the Zacks Consensus Estimate unchanged.
What Drives Estimate Revision
Recently, the diversified media conglomerate professed a further deepening of the slump in advertising revenue, thereby raising the alarm about troubled times ahead in the economy, and its susceptibility to such conditions.
The New York Times Company hinted that its advertising revenue for the third quarter of 2011 would now drop by 8% citing weak advertising spots in real-estate, help-wanted and national automotive at the company’s flagship paper. Earlier, the company had predicted that advertising revenue trends in the third quarter will be similar to the second quarter, when it slid by 4%.
The company commented that print advertising is expected to decline by 10%, whereas digital advertising revenue would drop between 2% and 3% during the third quarter.
The company’s current outlook portrays an aggravated situation compared with the second quarter of 2011, when the company had witnessed a drop of 6.4% in print advertising, and registered a growth of 2.6% in digital advertising revenue for New York Times’ Digital business, which includes NYTimes.com, About.com, Boston.com.
The company’s advertising volume for all its print publications and online came under pressure as advertisers shied away from making any upfront commitments, in an environment where the fear of another possible recession is gaining ground.
Despite hiccups in the economy, what still promises a guaranteed revenue generation avenue is The New York Times Company’s pricing system for NYTimes.com, which was launched on March 28, 2011. The company notified that the number of paid digital subscribers reached 224,000 at the end of the second quarter.
The publishing industry has long been grappling with sinking advertising revenue. This comes in the wake of a longer-term secular decline as more readers choose free online news, thereby making the print-advertising model increasingly irrelevant. To curb shrinking advertising revenue and seeking new revenue avenues, the publishing companies contemplated charging readers for online content. Another media conglomerate, News Corporation (NWSA) has also moved towards an online subscription-based model for general news content.
The New York Times Company remains committed to streamlining its cost structure, strengthening its balance sheet and rebalancing its portfolio. Currently, we have a long-term ‘Neutral’ rating on The New York Times Company. However, going by the pulse of the economy and waning advertising revenue, we prefer to have a short-term ‘Sell’ recommendation on the stock, which is well defined by our Zacks #4 Rank.
