Earnings Preview: New York Times

The New York Times Company (NYT), a diversified media conglomerate, is scheduled to report its first-quarter 2011 financial results before the bell on Thursday, April 21, 2011. The current Zacks Consensus Estimate for the quarter is 3 cents a share. For the quarter under review, revenue is $570 million, according to the Zacks Consensus Estimate.

Fourth-Quarter 2010, a Synopsis

On February 3, 2011, The New York Times Company posted fourth-quarter 2010 results. The quarterly earnings of 46 cents a share beat the Zacks Consensus Estimate of 34 cents, and rose 4.5% from 44 cents earned in the prior-year quarter.

The publisher of the New York Times and the Boston Globe registered a drop in top-line during the quarter. After declining 2.7% in the third quarter, total revenue slipped 2.9% to $661.7 million from the prior-year quarter, and also fell short of the Zacks Consensus Estimate of $664 million.

Total advertising revenue slid by 3.1% to $385.8 million, as against a marginal fall of 1% in third-quarter 2010. Circulation revenue declined 3.6% to $230.7 million due to a fall in the number of copies sold.

First-Quarter 2011 Consensus

Analysts surveyed by Zacks, expect The New York Times Company to post first-quarter 2011 earnings of 3 cents a share. The current Zacks Consensus Estimate represents a year-over-year decline of 25%. The estimates in the current Zacks Consensus for the quarter range from a loss of 2 cents to an earnings of 10 cents a share.

Zacks Agreement & Magnitude

Of the 5 analysts following the stock, none of them have revised their estimates upward or downward in the last 30 or 7 days, thereby keeping the Zacks Consensus Estimate unchanged.

Mixed Earnings Surprise History

With respect to earnings surprises, The New York Times Company has met as well as topped the Zacks Consensus Estimate over the last four quarters in the range of 0.0% to 40.0%. The average remained at 34.6%. This suggests that The New York Times Company has beaten the Zacks Consensus Estimate by an average of 34.6% in the trailing four quarters.

New York Times in Neutral Lane

The ongoing slump in the advertising market continues to weigh upon The New York Times Company. The company is witnessing a fall in print advertising and circulation revenues. We observe that the company faces a significant risk of high dependence on advertising revenues, which are driven by the health of the economy. To mitigate this, The New York Times is transmuting its business model by adding diverse revenue streams, which include a pay-and-read model for NYTimes.com.

The New York Times Company on March 28, 2011 launched a pricing system similar to that of the Financial Times’ metered system, whereby after browsing a certain number of free articles, readers will be asked to subscribe to enjoy full access to its articles on phones, tablet computers and the Internet.

The New York Times Company has fixed monthly charges of $15 for access to more than 20 articles on its website and a smartphone application; $20 for unlimited access online and on Apple Inc.’s (AAPL) iPad tablet computer application; and $35 for online, smartphone and iPad application.

The company also indicated that the users of NYTimes.com will be able to read 20 articles per month without spending a penny. However, readers visiting The New York Times Company’s website via blog links or social-media sites such as Facebook or Twitter will be able to access unlimited number of articles. But traffic reaching the company’s website through search engines such as Google Inc. (GOOG), Microsoft Corporation’s (MSFT) Bing and Yahoo Inc. (YHOO) will be able to view five articles per day before being asked for a subscription.

We believe the success of the pay model depends on the accessibility of new articles across the Web. People will be reluctant to shell out if content is available free of cost elsewhere. The Wall Street Journal and The Financial Times were the pioneers of the subscription-based model.

Way back in 2005, The New York Times Company had attempted to charge readers for online access to its columnists on a platform known as TimesSelect but rescinded it after two years as it failed to generate enough revenue.

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

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