The New York Times: Earnings Preview

Apr.17.12 | About: New York (NYT)

The New York Times Company (NYSE:NYT), the publisher of The New York Times, the International Herald Tribune and The Boston Globe, is scheduled to report its first-quarter 2012 financial results on Thursday, April 19, 2012.

The current Zacks Consensus Estimate for the quarter is 2 cents a share, which is in line with the prior-year quarter's earnings. The estimates in the current Zacks Consensus range between a low of 1 cent and a high of 3 cents a share. The Zacks Consensus estimates revenue at $499 million for the first quarter.

Recap of Fourth-Quarter 2011

On February 2, 2012, The New York Times Company delivered fourth-quarter 2011 results. The quarterly earnings of 45 cents a share beat the Zacks Consensus Estimate of 42 cents, but dropped 2.2% from 46 cents earned in the prior-year quarter.

The quarter reflected favorable response to the digital subscription packages, increase in digital advertising revenue at News Media Group, improvement in circulation revenue and fall in attrition rate as subscribers to the New York Times' print version were able to access content or articles online as well as on all applications of The Times for no additional charge. However, these failed to offset the waning print advertising.

The New York Times Company's top line continues to fall. After declining 3.1% in the third quarter, total revenue slipped 2.8% to $643 million in the quarter, and also fell short of the Zacks Consensus Estimate of $647 million.

(Refer the article: NY Times Beats, Profit Drops)

Zacks Agreement & Magnitude

The Zacks Consensus Estimate for the first quarter hasn't shown any movement in the last 30 days, as the upward and downward revisions made by analysts neutralized the impact. Of the 6 analysts following the stock, one revised the estimate upward and another analyst lowered the same in the last 30 days. In the last 7 days too, the Zacks Consensus Estimate remained constant, since an upward revision in the estimate made by 1 analyst did not have any substantial impact. None of the analysts trimmed their estimates in the last 7 days.

Mixed Earnings Surprise History

With respect to earnings surprises, The New York Times Companyhas missed as well as topped the Zacks Consensus Estimate over the last four quarters in the range of negative 33.3% to positive 66.7%. The average remained at positive 15.1%. This suggests that The New York Times Companyhas beaten the Zacks Consensus Estimate by an average of 15.1% in the trailing four quarters.

Our Take

The company's advertising volume came under pressure as advertisers shied away from making any upfront commitments, in an economy which has not yet fully recovered.

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.

Despite hiccups in the economy, what still promises a guaranteed revenue generation avenue is The New York Times Company's pricing system for, which was launched on March 28, 2011.

Another media conglomerate, News Corporation (NASDAQ:NWS) has also moved towards an online subscription-based model for its general news content. News International, a subsidiary of News Corporation, began charging readers for online content of The Times of London and Sunday Times of London effective June 2010.

The New York Times Company remains committed to streamlining its cost structure, strengthening its balance sheet and rebalancing its portfolio. However, we remain apprehensive about risks that the company faces due to its high dependence on advertising revenue.

Currently, we have a long-term "Neutral" recommendation on The New York Times Company. However, the company holds Zacks #4 Rank that translates into short-term 'Sell' rating.