NYT Earnings Preview: Revenue Growth In Focus

The New York Times Company (NYSE:NYT) is set to report its third quarter earnings on October 31. The secular decline in the print advertising industry has forced NYT to increase its online product offering and migrate its content online. Additionally, the company continues to add third party content, especially online videos, to its properties as per the growth strategy announced in Q1. In this earnings announcement, we’re looking to see to what extent this strategy helped NYT in acquiring new subscribers and bolstering its revenues. Additionally, we are looking for updates on its online ads division, which reported a decline in revenue in Q2. During the quarter, the company also closed the sale of New England Media Group for $70 million. We believe that NYT will be better off after this sale and expect it to report revenue growth in the future.

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Growth In Revenues Post The Sale Of Boston Globe

While NYT’s core business has held on to its market share and reported growth in circulation revenue, The New England Media group has consistently lost market share and reported decline in revenues. As a result, NYT’s combined business has been reporting a decline in revenue. The sale of New England Media Group was completed last week, and we expect NYT to post growth in revenues in the future. In this earnings announcement, we expect the management to disclose the impact of sale on future earnings of the company. Additionally, we believe that NYT can invest some of the cash from the sale to focus on building its core brand, The New York Times.

Digital Subscription To Grow

According to our estimates, NYT’s print circulation and digital subscription division contributes nearly 45% to its stock value. While NYT’s daily print circulation continues to decline, its digital subscriber base continues to gain traction. In Q2, NYT’s paid digital subscriber base grew by 40% y-o-y to over 738,000. The company continues to add content to its properties in an effort to attract more users. Additionally, NYT continued to leverage its brand popularity to expand abroad and rope in new digital subscribers. We expect NYT to show further improvement in online subscriptions in the quarter and continue to watch this metric closely during this earnings announcement.

Advertising Revenues In Focus

Print ads division is the second largest division of NYT and makes up for nearly 28% of its value by our estimates. With the advent of the Internet, print ads business has been on a decline since most advertisers have increased spending on online ads. Print ads division of NYT has not been able to buck the trend and continues to report decline in revenue. We expect the trend to continue in this quarter too.

Additionally, online advertising is the third largest division of NYT and makes up 25% of its estimated value. In the previous earnings announcement, NYT stated that digital advertising suffered from pricing pressure due to programmatic buying and glut of available ad inventory. However, NYT launched new ad formats to monetize its desktop and mobile content in Q2. Additionally, NYT continues to roll out video content for its properties to increase user engagement and bolster its online ads revenue. In this earnings announcement, we are closely following NYT’s online ads revenues and revenue per page view (RPM) metrics to ascertain whether these measures have helped the company to post growth.

Currently, we have a $8.33 price estimate for New York Times, which is approximately 30% below the current market price.