Categories Analysis, Leisure & Entertainment

Can Meredith (MDP) beat COVID blues with brand power?

Recently sold the Travel + Leisure brand to Wyndham Destinations for $100 million as part of streamlining operations

For Meredith Corporation (NYSE: MDP), a diversified media company focused on publishing and broadcasting, it was an opportunistic decision to bring all brands under a single digital platform as the virus crisis brought changes to consumer behavior. Currently, plans are afoot to clinch strategic deals to better monetize the company’s brands.

Read Management/analysts’ comments on quarterly earnings

In what could be the beginning of a much-awaited recovery, the company’s market value increased after the latest earnings report and maintained the uptrend since then. Earlier, for several months the stock had languished in the lowest level in more than a decade. Overall, the business benefited from an increase in digital advertising revenues last year, but it was mostly offset by weakness in the other areas due to the pandemic.

Growth Strategy

The Des Moines, Iowa-based media conglomerate has been making efforts to enhance financial flexibility and reduce costs, a strategy that seems to have helped it navigate through the COVID crisis. A key component of the growth plan is investments in the digital platform. Meredith’s media brands like Allreceipe and PEOPLE are quite popular among the American households. Podcasts from some of the popular brands and the recent launch of Meredith Data Studio, an advertising solutions suite designed to leverage first-party data, are important steps in that direction. It is more about incorporating technology into the print platform than simply promoting the digital channel.

As part of streamlining the operations, Meredith recently sold its Travel + Leisure brand to Wyndham Destinations Inc. (WYND) for $100 million. However, it will continue publishing the magazine with a new name under a 30-year licensing agreement. The management looks to pursue similar deals in the future to better monetize the company’s large brand portfolio, which expanded after it acquired Times Inc. a few years ago.

Mixed Q1

Meredith reported mixed results for the first three months of fiscal 2021, with revenues dropping 4% to $694 million and earnings jumping to $1.04 per share from $0.03 per share last year. Interestingly, it was much better than the outcome analysts had predicted. On the positive side, there has been a consistent sequential improvement in operating performance since the onset of the virus outbreak.

From Meredith’s Q1 2021 earnings conference call:

Traffic to our digital properties grew significantly. For example, had its best traffic performance in its history and remains the number one destination in the entertainment category. While Recipes, the world’s largest digital food site, had its best fiscal first quarter in its history. Year-over-year digital advertising revenues grew 15% to a record first quarter high.”

Future Perfect

While the management is bullish on the future performance, citing the strong liquidity position and the revolving credit facility that remains mostly untapped, it withheld guidance for the rest of the year. In the emerging scenario, there are a few factors the management can look forward to. They include higher consumer engagement on media platforms, resulting in an increase in magazine subscription rates and strong traffic to media sites as people consume more content during the shutdown.

Can Netflix hold its ground as streaming space gets crowded?

Meredith’s shares have been in a free fall for quite some time, with the value more than halving in the past twelve months. However, it got relief after the company reported impressive numbers for the first quarter, setting off a stock rally. The shares traded slightly lower during Wednesday’s early trading hours.

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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