New York Times (NYSE: NYT) is scheduled to report its fiscal second-quarter results on Wednesday, August 4. We expect NYT to likely beat the earnings expectations and see revenues coming in line, driven by the positive momentum of digital subscriptions. The company expects subscription revenues to increase approximately 15% compared with the second quarter of 2020 with digital-only subscription revenue expected to increase approximately 30%. Overall advertising revenues are expected to increase 55-60% year-over-year (y-o-y), with digital ad revenue up 70-75% thanks to some easy comps from last year’s ad slump. Our forecast indicates that NYT’s valuation is $50 per share, which is 15% higher than the current market price of $43. Look at our interactive dashboard analysis on NYT’s pre-earnings: What To Expect in Q2? for more details.
(1) Revenues to be in line with consensus estimates
Trefis estimates NYT’s Q2 2021 revenues to be around $489 Mil, in line with the consensus estimate. In Q1, NYT’s total revenue during the first quarter grew 7% y-o-y to $473 million, and operating profit jumped 89% y-o-y to $52 million. The pandemic cut deeper into ad sales, which were already falling as fewer people read the paper in print form, and many companies cut their marketing budgets. Consequently, overall advertising sales dropped 9% y-o-y to $97.1 million. As a whole, digital advertising grew 16% but print ad revenue fell 32%. However, the paper’s bet on digital readers continued to pay off in Q1, as the company added 293,000 net subscribers during Q1 – of which digital subs rose by 301,000 and print subscriptions declined by 8,000. At present, the company has 7.82 million total print and digital subscribers and is well ahead of its goal to achieve 10 million subscribers by 2025.
2) EPS expected to be ahead of consensus estimates
NYT’s Q2 2021 earnings per share (EPS) is expected to be $0.30 per Trefis analysis, 11% ahead of the consensus estimate of $0.27. Operating costs are expected to be in the mid-to-high teens compared with the second quarter of 2020 as the company continues to invest in the drivers of digital subscription growth and comp against the low spending of the second quarter of last year. We expect the company’s declining ad business to negatively impact profitability.
For the full year, we expect NYT’s adjusted net margin to decline 90 basis points y-o-y to 8.2% in fiscal 2021. This coupled with a 9% y-o-y rise in New York Times’ Revenue, could lead to a drop of $4 million y-o-y in adjusted net income to $159 million in 2021. All this, resulting in a possible adjusted EPS decline from $0.97 in 2020 to around $0.95 in 2021.
(3) Stock price estimate higher than the current market price
Going by our New York Times Valuation, with an adjusted EPS estimate of around 95 cents and P/E multiple of around 53x in fiscal 2021, this translates into a price of $50, which is 15% higher than the current market price of $43.
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