Meredith reported (https://tinyurl.com/y6tg6hex) before the market opened on 5 November 2020 it earned $0.88 per diluted share in the quarter that ended on 30 September 2020, up from a loss of $0.30 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP), per (http://goo.gl/xOz5a).
Meredith Corporation, which has roots going back 115 years, is a media company with television, print, and digital properties. The company's Local Media business owns 17 television stations. Its National Media group publishes well-known magazines, such as People and Better Homes & Gardens. In January 2018, Meredith acquired Time, Inc., for $2.8 billion, but. Meredith ultimately sold or closed some famous magazines (including, TIME, Sports Illustrated, Fortune, and Money) it bought to focus more on entertainment and lifestyle publications. In response to the "extremely challenging advertising environment” of the COVID-19 era, Meredith "paused" its dividend, cut pay for executives and employees, and significantly reduced capital expenditures.
Earnings from continuing items before special items, a non-GAAP figure, rose 3,367% to $1.04 per share from $0.03 one year earlier. Earnings from continuing items before special items, by excluding unusual and non-cash items that could obscure the results of a business's principal, ongoing operations, are intended to be cleaner measures of corporate profits. However, caution is warranted when analyzing these figures because management has considerable leeway in choosing which GAAP-required items to exclude.
The principal exclusions contributing to the $0.16 per share difference in the latest quarter between GAAP earnings and Earnings from continuing items before special items were: Severance and related costs [$0.20 per share], Integration and restructuring costs [$0.06 per share], and Other [($0.09) per share].
Earnings from continuing items before special items of $1.04 per share in the latest quarter significantly beat the $0.19 average ("consensus") of estimates made by Wall Street analysts. See https://tinyurl.com/y3jk5u7y for Meredith's earnings record and forecasts.
Stock market traders reacted positively to Meredith exceeding expectations. The price of the company's shares rose 23.6% during the trading day following the report.
Looking deeper into the GAAP results, "top-line" revenue in the September 2020 quarter totaled $694 million, 4% less than last year's $725 million. The National media business was responsible for 67% of overall revenue, and this unit's revenue fell by 12.2% compared to the year-earlier result. The Local media business contributed 33% of revenue, and this unit's revenue grew by 17.2%.
The gross margin strengthened from 62.3% of revenue to 65.2%, a sign that Meredith sold its output and services at more profitable prices relative to production costs. Sales, general, and administrative expenses decreased from 45.6% to 44.9% of quarterly revenue, which shows the company spent less per dollar of sales on other operational costs, such as marketing.
Meredith's operating activities generated $79 million in cash during the last quarter, up compared to ($14) million in the year-earlier period. Notable uses for cash included $0 million to buy back the company's common shares, and $9 million to acquire property, plant and capital equipment.
Free cash flow over the last 12 months totaled $350 million, or $7.61 per share using the latest share count. At the current market price per share of $13.64, this translates into a very attractive Free Cash Flow Yield of 55.8%.
The accompanying charts illustrate several trends in Meredith's financial results, taken from data in regulatory filings. The text and the charts are intended to provide some limited historical context for readers interested in the company’s finances. No investment advice is provided, and no investment offer of any kind is made or solicited. The accuracy of the information presented is not guaranteed, and readers are encouraged to independently verify all data.
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