Scripps Networks Interactive, Inc. (SNI) has reported fourth quarter 2009 financial results. Overall the results were mostly in line with the Zacks Consensus Estimates. Quarterly GAAP net income was $94.4 million or 57 cents per share, compared to a net loss of $154 million or 94 cents per share in the prior-year quarter.

However, excluding the gains from discontinued operations and other special items, Scripps Networks’ fourth quarter 2009 EPS was 52 cents, exactly in line with the Zacks Consensus Estimates.

Estimate Revisions Trend

The overall trend in estimate revisions is quite favorable. Over the last 7 days, 1 of the 16 analysts covering the stock has raised his estimates for full fiscal 2010. For the last 30 days, 7 of the 16 analysts covering the stock raised estimates for 2010. During the last 30 day, no analyst has made any downward revision of estimates.

Currently the Zacks Consensus Estimate for full fiscal 2010 earnings is $2.15 per share, which would be a substantial improvement over the full fiscal 2009 earnings of $1.77 per share. In 2008, Scripps Networks earned $1.68 per share.

Given the significant upward estimate revisions recently, the Zacks Consensus Estimate has moved up by 15 cents in the last 60 days and by 19 cents in the last 90 days. It is our view that given the strong growth in advertising and affiliate fee revenue at the company’s flagship lifestyle TV networks, estimate revision trends will remain positive in the coming days.

If Scripps Networks’ results for 2010 come inline with the Zacks Consensus Estimate, it would imply a massive 21.23% year-over-year growth. This acceleration in the company’s earnings growth is reflected in its current Zacks #2 Rank (Buy) and Outperform recommendation.

With respect to earnings surprises, the company’s fairly good track record is expected to persist in the coming quarters. Scripps Networks produced an impressive average earnings surprise of 6.85% in the last four quarters, which means that it beat the Zacks Consensus Estimate by that amount over the last year.

The current Zacks Consensus Estimate for the first quarter 2010 is 44 cents. There exists 2.27% upside potential (essentially a proxy for future earning surprises) of this estimate. With respect to full fiscal 2010, the positive upside potential is even larger, of about 3.26%.

Fourth Quarter 2009 in Detail

Quarterly consolidated revenue of $429.7 million was an improvement of 6% year-over-year. This was also better than the Zacks Consensus Estimate of $414 million. Huge growth of advertising and affiliate fee revenue at both the HGTV and Food Networks are the primary reasons for this impressive performance. Recently acquired Travel Channel also contributed positively.

Quarterly operating income was $127.6 million compared to an operating loss of $79 million in the prior-year quarter. In the reported quarter, total segment profit (excluding special items) was $191 million, up 4.8% year-over-year.

Lifestyle Media Segment

Quarterly total revenue (excluding Travel Channel) of $369 million was an improvement of 8.3% year-over-year. Out of this, Advertising revenue was $287.3 million, up 9.2% year-over-year, Affiliates fee revenue was $85.7 million, up 21.8% year-over-year, and Other revenue was $7.1 million, up 3.4% year-over-year. Quarterly total expense was $206 million, up 24% year-over-year.

Out of this, Programming expense was $97.4 million, up 42% year-over-year and Non-Programming expense was $108 million, up 12% year-over-year. Total segment profit was $163 million, down 6.9% year-over-year. However, excluding one time charges, total segment profit was up 7.8% year-over-year.

Brand-wise, HGTV revenue was $156 million, up 5% year-over-year. Its total subscriber base is now 99 million (up 1% year-over-year). Food Network revenue was $144 million, up 13% year-over-year. Total subscriber base is now 99 million (up 1% year-over-year). DIY Network revenue was $18.5 million, up 11% year-over-year. Total subscriber base is now 53 million (up 8.2% year-over-year).

Fine Living Network (FLN) revenue was $12.2 million, down 4.7% year-over-year. Total subscriber base is now 56 million (up 3.7% year-over-year). Great American Country (GAC) revenue was $7.6 million, up 7.1% year-over-year. Total subscriber base is now 58 million (up 5.5% year-over-year). SN Digital revenue was $27.6 million, up 10% year-over-year.

Operating revenue at Travel Channel was $11.5 million during the 16 days that it was owned by Scripps Networks.

Interactive Services Segment

Quarterly total revenue of $49 million was down 25% year-over-year. Operating expenses were $39 million down 13% year-over-year. However, segment profit was $10.1 million, down 50.2% year-over-year.

Future Financial Guidance

Management has provided guidance for full fiscal 2010. Total affiliate fee revenue is expected to be $530 million – 540 million. Travel Channel represents about $100 million of the total affiliate fee revenue.

Programming expenses are expected to be $380 million – 400 million. Non-programming expenses are expected to be $550 million -570 million, including one-time transition costs related to the Travel Channel. Interactive Services Segment profit from the company’s Shopzilla comparison shopping business is expected to be $33 million – 35 million.

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