Meredith Reiterated at Neutral - Analyst Blog

We have maintained our long-term Neutral recommendation on leading media and marketing company, Meredith Corporation (MDP), with a target price of $38.00, following its second-quarter fiscal 2013 results.

Why Neutral?

Meredith posted better-than-expected bottom line results for the second-quarter of fiscal 2013. The quarterly earnings of 89 cents a share came a penny ahead of the Zacks Consensus Estimate and jumped 27% year over year, owing to strong advertising revenues along with increased readership.

Total revenue strengthened 10% year over year to $360.6 million. However, it fell short of the Zacks Consensus Estimate of $373 million.

Meredith has been constantly endeavoring to explore and add alternative revenue generating channels through acquisitions or strategic alliances. The company’s efforts are paying off as it marked an improvement in other revenues on account of higher retransmission revenues during the first half of fiscal 2013.

The company also renewed its long-term affiliation agreements with CBS Corporation (CBS) and News Corp.’s (NWSA) Fox Broadcasting Co. Alongside, Meredith is aggressively expanding its brands through online platforms, televisions, videos, mobile applications, and broadening its reach of food and lifestyle content.

Despite these measures, our primary concern remains the fact that the company generates more than half of its revenue through advertising, which in turn depends upon the health of the economy. The company’s National Media Group and Local Media Group’s revenue remain susceptible to changes in advertising demand with nearly 90% of Local Media Group’s revenue coming from advertising.

Currently, shares of Meredith retain a Zacks Rank #2 (Buy) as it continues to focus on bolstering advertising revenue, primarily in the digital space and enhancing online consumer transactions, especially magazine subscription orders. Moreover, the company’s focus on brand licensing, marketing services and e-Commerce is expected to drive revenues.

Other Stock to Consider

Besides Meredith, Reed Elsevier plc (RUK), which holds a Zacks Rank #2 (Buy), is another media and marketing company worth considering in the near term.