The New York Times Company (NYT) this morning posted better-than-expected third-quarter 2010 results. The quarterly earnings of 7 cents a share beat the Zacks Consensus Estimate of 5 cents, but dropped more than 50% from 16 cents earned in the prior-year quarter.
On a reported basis, including one-time items, the company posted a quarterly loss of 3 cents compared to a loss of 25 cents delivered in the year-ago quarter.
The New York Times also registered a drop in top-line during the quarter. After climbing 1.2% in the second quarter, total revenue slipped 2.7% to $554.3 million compared with the prior-year quarter, and fell short of the Zacks Consensus Revenue Estimate of $560 million.
The ongoing slump in the advertising market continues to weigh upon The New York Times Company, the publisher of The New York Times, the International Herald Tribune, The Boston Globe and 15 other daily newspapers. Total advertising revenue slid by 1% to $287 million, as against a marginal fall of 0.2% in second-quarter 2010.
By segment, News Media Group revenue tumbled 3.1% to $521.9 million. Advertising revenue dropped 1.7% to $256.1 million. Print advertising fell 5.8%, whereas digital advertising jumped 21.6%. Circulation revenue declined 4.8% to $229.1 million due to a fall in the copies sold. Adjusted operating profit plunged 25.2% to $56.2 million due to a fall in revenue.
Management now expects fourth-quarter 2010 print advertising revenue to improve moderately sequentially, and digital advertising to rise approximately 10%. The New York Times cautioned that circulation revenue in fourth-quarter 2010 is expected to fall by 4% to 5%.
About Group segment’s revenue jumped 5.5% to $32.5 million due to an increase in display advertising, partially offset by lower cost-per-click advertising. Adjusted operating profit rose 1.8% to $16.8 million, reflecting an increase in advertising revenue, offset by a rise in costs.
Revenue for New York Times’ Internet business, which includes NYTimes.com, About.com, Boston.com, surged 13.3% to $89.4 million, and now accounts for 16.1% of total revenue, up from 13.9% in the prior-year quarter. Internet advertising revenue soared 14.6% to $78.3 million.
Online advertising has now become an integral part of the company’s revenue stream with advertisers migrating to the Internet driven by increasing online readership and lower ad prices online than print.
To seize the benefit of growing trends among readers, who are surfing the Internet for free news, the publishing companies are now even considering charging readers for viewing online content.
The New York Times Company has already taken a step toward the paid model. During the quarter under review, the company’s New England Media Group property, the Worcester Telegram & Gazette, launched a subscription-based model for its website.
The New York Times Company also plans to introduce a ‘pay and read’ model for NYTimes.com in 2011, with plans to launch a paid subscription website, BostonGlobe.com in the second half of 2011.
The company is also adapting to the dynamics of the multiplatform media universe, which currently includes mobile, social media networks and reader application products.
The New York Times Company also notified that it has been effectively managing its operating costs despite the rise in compensation costs and newsprint prices. Operating costs, excluding one-time items, rose marginally by 0.8% during the quarter.
Management hinted that operating costs in fourth-quarter 2010 will remain flat compared with the year-ago quarter despite higher newsprint prices and costs related to the development of the NYTimes.com pay model.
The company remains committed to lowering its debt through cash generated from operations. The New York Times Company lowered its debt burden, net of cash and cash equivalents, by more than one-third to $645.8 million since the beginning of 2009. Moreover, the majority of the debt matures in 2015 or later.
Capital expenditures for the quarter were approximately $9 million. Management now anticipates capital expenditures between $40 million and $45 million for fiscal 2010. The New York Times Company remains committed to streamlining its cost structure, strengthening its balance sheet and rebalancing its portfolio.
The market had inkling of the disappointing results of The New York Times Company. Therefore, the stock has fallen a mere 6 cents (0.75%) in morning trading.
Currently, we have a Neutral rating on the stock. Moreover, The New York Times Company holds a Zacks #4 Rank, which translates into a short-term Sell rating.
NY TIMES A (NYT): Free Stock Analysis Report
Zacks Investment Research
