ATML Earnings Action

The outlook is pretty bleak for Meredith Corp. (MDP). The publishing company best known for its Better Homes and Gardens and Family Circle brands reported first quarter publishing profit that was down to $33 million from $55 million a year ago with broadcasting operating profit down to $11 million from $14 million. There were some bright spots – the ability to cut expenses by 5% in the face of 22% higher paper costs, strength in some of its non-core ad categories, political advertising, marketing and brand licensing growth, but nothing to really offset the overall softness in advertising. And already in the second quarter, which is expected to be a tough comparable period especially with substantially higher paper costs upwards of 25%, publishing ad revenue is down in the high teens and broadcasting non-political advertising is off in the high twenty percent range compared to a year ago. Thus, second quarter earnings per share were lowered to a range of $.47 to $.52, with the 2009 fiscal year earnings bar set between $2.50 and $2.85 a share. But if there is a silver lining, it’s that management was able to hold the line on the lower limit of fiscal year earnings while reducing the upper limit down from $3.00 in July and that despite the earnings falloff, a bearish outlook and further hits to the bottom line seem to be priced in with a PE multiple in the mid-single digits. Come the end of January, Meredith will be releasing its second quarter results. At that time, the company will have had access to calendar ’09 budgets for advertisers and should better project earnings with more confidence for the rest of the year. With market expectations at rock bottom, any better than worst case news on the outlook could induce a decent short covering rally (14.6% of the publicly traded float of 36.33 million is held short), making Meredith a decent publishing industry contrarian play.