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Category: Stock Market and New York Times Company
Date: 7 May 2020 Stock Price: $34.81 We take a look at the 1st quarter 2020 earnings report of The New York Times Company, a media group that owns The New York Times and NYTimes.com. With firms struggling due to the coronavirus pandemic, has it affected the advertising revenues of the group?
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About The New York Times Company
The New York Times Company is a global media organization dedicated to enhancing society by creating, collecting and distributing high-quality news and information. The Company includes The New York Times, NYTimes.com and related properties. It is known globally for excellence in its journalism, and innovation in its print and digital storytelling and its business model.
Overview of The New York Times Company's 1st quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise
- Net sales: $1.646 billion (up from $1.413 billion for the same quarter of the previous year)
- Net sales increased by 16.5% over the last 12 months
- Cost of sales: $1.052 billion (up from $929.538 million for the same quarter of the previous year)
- Cost of sales increased by 13,1% over the last 12 months
- So some margin gain for The New York Times Company, as their net sales grew at a rate faster than that of their cost of sales
- Net income of The New York Times Company: $91.810 million (up from $56.392 million for the same quarter of the previous year)
- Diluted earnings per share: $0.78 (up from $0.46 for the same quarter of the previous year)
- PE ratio of The New York Times Company : 6.9
- Diluted number of shares in issue: 117.748 million (down from 123.926 million for the same quarter of the previous year)
- Cash and cash equivalents: $247.101 million
- Cash and equivalents per share: $2.09
- Cash and cash equivalents makes up 9.4% of The New York Times Company's market capital
- Cash and cash equivalents makes up 8.7% of The New York Times Company's total assets
- Inventories of The New York Times Company: $253.191 million
- Inventores makes up 8.8% of The New York Times Company's total assets
- Goodwill of The New York Times Company: $368 million
- Goodwill per share: $3.12
- Goodwill makes up 1.3% of The New York Times Company's total assets
- Stockholders equity in The New York Times Company: $670.722 milion
- Stockholders equity per share: $5.69
- So The New York Times Company is trading at 6.1 times its stockholders equity which is far outside the expected range of between 2 and 4 times that most firms tend to trade at.
- For perspective the average price to book value of firms in the S&P 500 is 3.34 times. Read more about the S&P 500 here
- Cash generated from operation: $277.072 million
- Cash generated from operation per share: $2.36
The New York Times Company's management commentary on their 1st quarter 2020 earnings
NEW YORK, May 6, 2020 – The New York Times Company (NYSE: NYT) announced today first-quarter 2020 diluted earnings per share from continuing operations of $.20 compared with $.18 in the same period of 2019. Adjusted diluted earnings per share from continuing operations (defined below) was $.17 in the first quarter of 2020 compared with $.20 in the first quarter of 2019.
Mark Thompson, president and chief executive officer, The New York Times Company, said, “The New York Times is committed to delivering the most trustworthy news and useful guidance about the coronavirus and its consequences. Today, despite the many obstacles our newsroom is facing, we believe we are doing just that. “Some of our colleagues are witnessing and recording this terrible tragedy firsthand in hospitals and other hazardous environments. We are doing everything we can to keep them safe, but they - and the patients and health workers they are covering - are constantly in our thoughts. Indeed, we’re grateful to everyone at The Times for all their hard work and commitment during this difficult period.
Mark Thompson, president and chief executive officer, The New York Times Company, said, “The New York Times is committed to delivering the most trustworthy news and useful guidance about the coronavirus and its consequences. Today, despite the many obstacles our newsroom is facing, we believe we are doing just that. “Some of our colleagues are witnessing and recording this terrible tragedy firsthand in hospitals and other hazardous environments. We are doing everything we can to keep them safe, but they - and the patients and health workers they are covering - are constantly in our thoughts. Indeed, we’re grateful to everyone at The Times for all their hard work and commitment during this difficult period.
“The Times’s business model, with its growing focus on digital subscription growth and diminishing reliance on advertising, is very well positioned to ride out this storm and thrive in a post-pandemic world. We’ve seen historic audience levels and an unprecedented rate of subscriber growth as well as real pressure on advertising revenue. “In the first quarter, we added 587,000 net new digital subscriptions, resulting in the highest number of net new subscriptions in a quarter in our history. This was despite the fact that we are allowing audiences to access the majority of our coverage related to the coronavirus outside of our pay model. Of the 587,000 net adds, 468,000 were to our core news product, with 119,000 to our other digital products. As of the end of 5/5/20, The Times now has more than four million subscriptions to our digital-only news product; more than five million digital-only subscriptions in all; and more than six million total subscriptions across digital and print.
"We saw advertising fall rapidly towards the end of the quarter and believe that advertising in the second quarter will fall between 50% and 55% compared to a year ago with limited visibility beyond that. Nonetheless, we believe that the Company will emerge from this global crisis with a distinctive and valuable advertising revenue stream to complement a digital news subscription business which is now by far the largest and most successful in the world. The revenue from those subscriptions - and our strong balance sheet - give us real confidence, not just that we can remain financially sound through the pandemic, but also that we can safely invest in our digital growth strategy and continue to hire new talent to help execute it. “This week Times journalism was rewarded with three Pulitzer prizes. The world needs that journalism today more than ever. We believe we have the loyal readers and the right business model to ensure that we can continue to provide it.”
Outlook
Total subscription revenues in the second quarter of 2020 are expected to increase in the mid- to high single digits compared with the second quarter of 2019, with digital-only subscription revenue expected to increase in the high-twenties. Total advertising revenues in the second quarter of 2020 are expected to decline approximately 50 percent to 55 percent compared with the second quarter of 2019, with digital advertising revenue expected to decrease approximately 40 percent to 45 percent, largely due to the impact from the COVID-19 pandemic. Other revenues in the second quarter of 2020 are expected to decrease approximately 10 percent compared with the second quarter of 2019. Operating costs and adjusted operating costs in the second quarter of 2020 are expected to be flat or to decrease in the low-single digits compared with the second quarter of 2019 as the Company defers nonessential spending while continuing to invest in the drivers of digital subscription growth.
The Company expects the following on a pre-tax basis in 2020:
Our outlook is based on our current knowledge and assumptions and could be impacted by the evolving COVID-19 pandemic
"We saw advertising fall rapidly towards the end of the quarter and believe that advertising in the second quarter will fall between 50% and 55% compared to a year ago with limited visibility beyond that. Nonetheless, we believe that the Company will emerge from this global crisis with a distinctive and valuable advertising revenue stream to complement a digital news subscription business which is now by far the largest and most successful in the world. The revenue from those subscriptions - and our strong balance sheet - give us real confidence, not just that we can remain financially sound through the pandemic, but also that we can safely invest in our digital growth strategy and continue to hire new talent to help execute it. “This week Times journalism was rewarded with three Pulitzer prizes. The world needs that journalism today more than ever. We believe we have the loyal readers and the right business model to ensure that we can continue to provide it.”
Outlook
Total subscription revenues in the second quarter of 2020 are expected to increase in the mid- to high single digits compared with the second quarter of 2019, with digital-only subscription revenue expected to increase in the high-twenties. Total advertising revenues in the second quarter of 2020 are expected to decline approximately 50 percent to 55 percent compared with the second quarter of 2019, with digital advertising revenue expected to decrease approximately 40 percent to 45 percent, largely due to the impact from the COVID-19 pandemic. Other revenues in the second quarter of 2020 are expected to decrease approximately 10 percent compared with the second quarter of 2019. Operating costs and adjusted operating costs in the second quarter of 2020 are expected to be flat or to decrease in the low-single digits compared with the second quarter of 2019 as the Company defers nonessential spending while continuing to invest in the drivers of digital subscription growth.
The Company expects the following on a pre-tax basis in 2020:
- Depreciation and amortization: approximately $60 million,
- Interest income and other, net: $18 million to $22 million, and
- Capital expenditures: approximately $50 million.
Our outlook is based on our current knowledge and assumptions and could be impacted by the evolving COVID-19 pandemic
The New York Times Company (NYSE:NYT) stock price history
The image below obtained from Google shows The New York Times Company stock price for the last 5 years. And it's been a very good time for The New York Times Company stockholders. 5 years ago the stock of The New York Times Company was trading around $13.80 a stock and its currently trading at $34.81. That's a strong return of 147.7% provided to The New York Times Company stockholders over the last 5 years.
The stock of The New York Times Company is trading a lot closer to its 52 week high of 40.22 than it is to its 52 week low of $26.13. This to us is a clear indication that the short term momentum and sentiment towards The New York Times Company stock is positive.
The stock of The New York Times Company is trading a lot closer to its 52 week high of 40.22 than it is to its 52 week low of $26.13. This to us is a clear indication that the short term momentum and sentiment towards The New York Times Company stock is positive.
Recent Google search trends for The New York Times stock price and NYT stock price
The graphic below shows the trend in Google searches for New York Times stock price and NYT stock price over the last 12 months in the United States as obtained from Google Trends. As it shows the searches for New York Times stock price an NYT stock price has been very erratic over the last 12 months with not a lot of consistent searches for it over the 12 month period.
Recent coverage of The New York Times Company
The extract below covers the latest earnings report from The New York Times Company as obtained from TheStreet.com
New York Times Co. (NYT)beat analysts' first-quarter expectations for earnings and revenue as digital subscriptions surged. But the media company is warning of a more than 50% drop in ad revenue for the second quarter amid the fallout from covid-19. Shares of the parent of The New York Times at last check rose 4% to $34.68. The media company earned 17 cents a share in the first quarter, down from 20 cents in the year-earlier period. The latest result beat the 13-cent-a-share estimate of analysts surveyed by Zacks Investment Research.
Revenue of $443.6 million for the quarter rose 1% from a year earlier and edged past the $439.6 million estimate of analysts polled by FactSet. A jump in digital subscriptions helped push up revenue from paid readership by 5.4%, to $285.4 million. New York Times was hit with a more than 15% drop in ad revenue in the first quarter, to $106.1 million. The company reported it had added a record 587,000 net new digital subscriptions during the quarter, amid heavy interest in and coverage of the coronavirus crisis.
Read the full article here
New York Times Co. (NYT)beat analysts' first-quarter expectations for earnings and revenue as digital subscriptions surged. But the media company is warning of a more than 50% drop in ad revenue for the second quarter amid the fallout from covid-19. Shares of the parent of The New York Times at last check rose 4% to $34.68. The media company earned 17 cents a share in the first quarter, down from 20 cents in the year-earlier period. The latest result beat the 13-cent-a-share estimate of analysts surveyed by Zacks Investment Research.
Revenue of $443.6 million for the quarter rose 1% from a year earlier and edged past the $439.6 million estimate of analysts polled by FactSet. A jump in digital subscriptions helped push up revenue from paid readership by 5.4%, to $285.4 million. New York Times was hit with a more than 15% drop in ad revenue in the first quarter, to $106.1 million. The company reported it had added a record 587,000 net new digital subscriptions during the quarter, amid heavy interest in and coverage of the coronavirus crisis.
Read the full article here
The New York Times Company (NYSE: NYT) stock valuation
So based on The New York Times Company's 1st quarter 2020 earnings report what do we value The New York Times Company's stock at? Based on their earnings reported our valuation model provides a target price (full value price) for The New York Times Company's at $43.20 a stock
We therefore believe that the stock of The New York Times Company is undervalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $43.10. A good entry price into The New York Times Company's would therefore be at $38.90 or below.
Since the stock of The New York Times Company is trading at well below our suggested entry point we rate the stock a buy
We therefore believe that the stock of The New York Times Company is undervalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $43.10. A good entry price into The New York Times Company's would therefore be at $38.90 or below.
Since the stock of The New York Times Company is trading at well below our suggested entry point we rate the stock a buy
Next earnings release of The New York Times Company
The New York Times Company is expected to release their 2nd quarter 2020 earnings report in early August 2020