New York Times Is Thriving In Fiscal 2018
New York Times (NYSE: NYT) announced solid third quarter results on November 1, as both its earnings per share and revenues came in ahead of market expectations. In addition, NYT’s stock gained almost 7% following the Q3 earnings release, and also touched its ten-year high during the trading day. Overall, the company’s revenues grew 8% y-o-y to $417 million, driven by 20% y-o-y growth in digital-only subscription revenues to $101 million. NYT again reported unprecedented growth in digital-only subscriptions, which grew strongly at 24% y-o-y to 3.1 million. This increase in new subscribers in Q3 led to growth in NYT’s overall subscription revenues, which contribute more than half of total revenues. The company’s total subscriptions now stand at more than 4 million. Further, NYT’s advertising revenues also grew 7% y-o-y, as digital ad revenue grew 17% year-over-year (y-o-y) while print ad revenues dropped marginally y-o-y.
New York Times’ stock price has increased more than 50% over the course of 2018, primarily driven by impressive digital subscriber growth since the 2016 U.S. elections. Our $23 price estimate for NYT’s stock is now nearly 20% below the current market price following this rally. Our interactive dashboard on What To Expect From NYT’s Q4 outlines our forecasts for the company’s Q4 and fiscal 2018 results. You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation. We expect NYT to continue to post an increase in earnings and revenue growth rate in Q4, driven by the positive momentum of digital subscriptions and the U.S. midterm elections.
Q4 Guidance
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Going forward, NYT expects its total subscription revenues to increase in the mid-single digits, compared to the fourth quarter of 2017, with digital-only subscription revenue expected to increase in mid-teens. The company also expects its advertising revenues to be approximately flat y-o-y, and digital advertising to increase in the mid-teens. In addition, the company’s other revenues are expected to increase 40% y-o-y, largely due to anticipated growth in its commercial printing operations. Also, NYT’s adjusted operating costs are expected to increase in the mid-single digits, driven by higher marketing costs.
Fiscal 2018 Outlook
Overall, NYT’s online subscriber base has grown from 800,000 in 2013 to 3.1 million in Q3 2018. Going forward, we estimate NYT’s online subscriber base to be its biggest value driver, and forecast this growth to pick up in the coming years and reach 4.5 million by 2022. As of now, we forecast the company’s subscription revenue for 2018 to grow by 15% y-o-y. We forecast advertising revenue to decline 10% y-o-y to around $500 million in 2018, on the back of the continued decline in the display (print) advertising and traditional website display advertising. We also estimate NYT’s operating profit to reach $160 million, based on lower expected operating expenses and higher expected special items costs such as restructuring charges, pension settlement expenses, and post-retirement benefit plans. Based on the above estimates, and our adjustments to operating expenses, we expect NYT’s adjusted net income to grow about 14% y-o-y.
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