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Meredith Corporation (MDP) is scheduled to report its second-quarter 2011 financial results on January 25, 2011. The current Zacks Consensus Estimate for the quarter is 86 cents a share. For the quarter under review, revenue is $363 million, according to the Zacks Consensus Estimate.

First-Quarter 2011: A Synopsis

Meredith Corporation posted first-quarter 2011 results on October 26, 2010, that exceeded the Zacks Consensus Estimate. The quarterly earnings of 56 cents a share outpaced the Zacks Consensus Estimate of 50 cents and rose 40% from 40 cents delivered in the prior-year quarter.

Total revenue for the quarter jumped 3.6% year over year to $344.4 million, reflecting a 7% increase in total advertising revenue and 1.8% increase in other revenue, which was partially offset by a 4.2% decline in circulation revenue due to repositioning of the Special Interest Media business. However, total revenue fell short of the Zacks Consensus Revenue Estimate of $348 million.

Management Guided

Meredith at its last earnings call had forecasted earnings in the range of 75-80 cents a share for the second quarter and in the range of $2.50-2.75 a share for fiscal year 2011.

Second-Quarter 2011 Zacks Consensus

Analysts considered by Zacks expect Meredith to post second-quarter 2011 earnings of 86 cents a share. The current Zacks Consensus Estimate reflects a growth of 75.5% from the prior-year quarter earnings. The current Zacks Consensus Estimates for the quarter range between 85-87 cents.

Zacks Agreement & Magnitude

Of the five analysts following the stock, only one analyst revised the estimate upwards in the last 30 days, which led to an increase in the Zacks Consensus Estimate for second-quarter 2011. The estimate moved up to 86 cents from 78 cents in the last 30 days.

Positive Earnings Surprise History

With respect to earnings surprises, Meredith has topped the Zacks Consensus Estimate over the last four quarters in the range of 6.1% to 12.0%. The average remained at 9.1%. This suggests that Meredith has beaten the Zacks Consensus Estimate by an average of 9.1% in the last four quarters. Given the past performance, we expect the company to outperform the Zacks Consensus Estimate.

Meredith in Neutral Lane

The improving advertising performance at Meredith’s National and Local Media groups, and increasing readership and online traffic, have been benefiting the company’s top and bottom line results.

Meredith is one of the leading media and marketing companies with interests in publishing, broadcasting, integrated marketing and interactive media. The company boasts a strong portfolio of women’s magazines with a relatively stable circulation, which has helped it gain market share.

Meredith has been also working diligently to explore and add alternative revenue-generating opportunities in order to reduce its dependence on traditional advertising by entering into strategic alliances. These include the expansion of its integrated marketing offers, video related operations, brand licensing, and mobile initiatives.

Marketing revenue climbed 7%, whereas Brand Licensing revenue surged about 17%, led by a rise in sales of Better Homes and Gardens' branded products at Wal-Mart Stores Inc. (WMT).

However, more than half of Meredith’s revenue comes from advertising, which depends upon the health of the economy. An economic downturn stunts advertising demand. Although the economy is gradually regaining pace, publishing and broadcasting revenues still remain susceptible to changes in advertising demand.

Consequently, we prefer to be Neutral on the stock. However, Meredith holds a Zacks #2 Rank, which translates into a short-term Buy rating.

Source: Meredith Corp. Earnings Preview