New York Times Q2 Earnings Preview: Growth In Digital Subscriptions To Continue
The New York Times Company (NYSE:NYT) is scheduled to report its second quarter results on Thursday, July 27. In Q1, NYT reported unprecedented growth in digital subscriptions, which helped the company stabilize its circulation revenues. The company’s total circulation revenues increased 11% year-over-year (y-o-y) in the quarter, with digital-only subscription revenue growing strongly at 40% y-o-y to $76 million. However, headwinds in print advertising (-18%) resulted in a 7% y-o-y decline in the company’s overall advertising revenues in the quarter. Despite this continued pressure, the company’s overall revenues grew 5% y-o-y to $399 million, driven by very strong digital subscriptions.
NYT has been seeing impressive subscriber figures in the past few quarters, particularly digital subscribers, partially offsetting the print circulation pressure. This surge in the newspaper’s subscriptions is largely being driven by the current political climate in the U.S. NYT has gained many subscribers driven by the publicity and controversy surrounding President Trump, as he has been highly critical of the newspaper and has attacked it several times on Twitter (NYSE:TWTR), calling it “failing” and criticizing its coverage. In fact, we expect NYT to benefit from the “Trump Bump” and grow its digital paid subscriptions throughout the entire Trump presidency. The company’s stock is already up 32% year-to-date.
Digital Subscriptions Boost Circulation Revenues
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NYT’s total digital-only subscription revenues grew 9% quarter-over-quarter (q-o-q) in Q4, due to a more than tenfold increase in the newspaper’s daily subscription sign-ups following the presidential election. The company continued to attract readers after the election as well, and saw an almost 20% jump in digital subscribers during the first quarter from 1.85 million to 2.2 million. This jump boosted an already strong 2016 performance that saw digital subscribers grow by over 45% y-o-y. In Q1 alone, the paper added 308,000 new digital subscribers, which was a record number, that helped to offset continued pressure on print circulation revenues.
Almost 24% of the company’s revenue comes from print advertising. As the company’s legacy print business is on a steady decline, and the company is already in a transition phase of turning digital, the recent boost from the political season could help NYT strengthen its readership and boost earnings.
Going forward, we expect continued year-over-year growth in the second quarter of 2017 as well, but at a slower rate than in the prior two quarters, followed by strong growth thereafter. However, if the company is able to maintain a growth rate of 20%, there could be an upside of around 7% to our price estimate. In Q2, Reuters’ compiled analyst estimates forecast revenues of $393 million and earnings of 14 cents per share, implying a growth of about 6% and 27%, respectively.
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