Seeking Alpha
Profile| Send Message|
( followers)  

Meredith Corporation (NYSE:MDP), a leading media and marketing company, posted third-quarter 2010 results on April 28, 2010 that exceeded the Zacks Estimate on the heels of improved advertising performance at its National and Local Media groups, increased readership and online traffic.

Wall Street analysts have now had nearly a month to digest all the news. Below we cover the results of the recent earnings announcement, subsequent analyst estimate revisions and the Zacks ratings for the short-term and long-term outlook for the stock.

Earnings Report Review

The quarterly earnings of 69 cents a share outpaced the Zacks Consensus Estimate of 63 cents, and rose 25% from 55 cents delivered in the prior-year quarter. Management now expects earnings for fourth-quarter 2010 in the range of 61 cents to 66 cents a share, and for fiscal year 2010 in the range of $2.13 to $2.18.

Total revenue for the quarter jumped 5% year-on-year to $353.3 million, reflecting an 8% increase in total advertising revenue, and a 2% rise in circulation revenue, partially offset by a 1% drop in other revenue.

Earnings Estimate Revisions - Overview

Estimates are on the rise for Meredith Corporation since the earnings release. The Zacks Consensus Estimate has moved up significantly for fiscal 2010 and 2011 that dovetails with the company’s earnings guidance.

Agreement of Estimate Revisions

In the last 30 days, 3 out of the 7 analysts covering the stock raised the estimate for the upcoming fourth quarter, while one analyst lowered the estimate. For the following quarter, 3 analysts have raised their estimates. For fiscal 2010 and 2011, 5 analysts have raised their estimates. (Click to enlarge)
Magnitude of Estimate Revisions

The Zacks Consensus Estimate moved upwards by two cents for fourth-quarter 2010, and by 6 cents for the following quarter in the last 30 days. Moreover, the Zacks Consensus estimate for fiscal 2010 is up 12 cents, while for fiscal 2011, it is up 9 cents.

The estimates in the current Zacks Consensus for fourth-quarter 2010 range from a low of 63 cents to a high of 68 cents. For fiscal 2010, the estimates range from $2.15 to $2.20.
Meredith in Neutral Lane
The improving advertising performance at Meredith’s National and Local Media groups, and increasing readership and online traffic has been benefiting the company’s top and bottom line results. The company boasts a strong portfolio of women’s magazines that has helped it gain market share. Meredith has been also exploring revenue streams beyond traditional advertising by leveraging its brands through strategic alliances.
However, more than half of the company’s revenue comes from advertising, which depends upon the health of the economy. Typically, a recession sees a drop in advertising demand. Therefore, both publishing and broadcasting revenues run the risk of being negatively impacted by changes in advertising demand.
Meredith shares are maintaining a Zacks #2 Rank, which translates into a short-term "Buy" recommendation. Our long-term recommendation for the stock remains "Neutral."
Source: Meredith Corp. Q3 Earnings Scorecard