How Will Q4 Earnings Affect New York Times Stock?

New York Times (NYSE: NYT) is scheduled to report its fiscal fourth-quarter results on Thursday, February 4. We expect NYT to likely beat the revenue and earnings expectations, driven by the positive momentum of digital subscriptions in Q4. The company expects subscription revenue to grow about 14% year-over-year (y-o-y), with digital-only subscription revenue up 35%. Total ad revenue is expected to fall about 30%, of which digital ad revenue could go down in the mid-teens, with the company noting the impact of the pandemic.

Our forecast indicates that NYT’s valuation is $49 a share, which is marginally lower than the current market price of around $50. Look at our interactive dashboard analysis on NYT’s pre-earnings: What To Expect in Q4? for more details.

(1) Revenues to be slightly ahead of consensus estimates

Trefis estimates NYT’s Q4 2020 revenues to be around $500 Mil, slightly ahead of the consensus estimate of $498 Mil. In the first nine months of fiscal 2020, NYT’s total revenue declined 2% y-o-y. The pandemic cut deeper into ad sales, which were already falling as fewer people read the paper in print and many companies cut their marketing budgets. NYT’s online advertising revenues also fell due to a falloff in the company’s native content business, in which it creates paid articles for sponsors. However, the paper’s bet on digital readers continued to pay off, and in Q3, the company’s online subscriptions topped the print subscribers for the first time – bringing the total of paid online readers to more than 6 million. At present, the company has 6.9 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 Q4 2020 earnings per share (EPS) is expected to be $0.38 per Trefis analysis, 12% ahead of the consensus estimate of $0.34. Operating costs are expected to be flat or decline in the low single-digits compared with the fourth quarter of 2019 as the company manages nonessential spending while continuing to invest in the drivers of digital subscription growth. We expect the company’s ongoing news product innovation and further expansion of its live news offerings to positively impact profitability. But the decline in the advertising business could partially offset this growth.

For the full-year, we expect NYT’s adjusted net margin to remain almost flat at 8.8% in 2020. This coupled with a 2% y-o-y decline in NYT’s revenues, could lead to a drop of $4 million y-o-y in adjusted net income to $156 million in 2020. All this, resulting in a possible adjusted EPS decline from $0.93 in 2019 to around $0.92 in 2020.

(3) Stock price estimate marginally lower than the current market price

Going by our NYT’s valuation, with an adjusted EPS estimate of around 92 cents and P/E multiple of around 53x in fiscal 2020, this translates into a price of $49, which is slightly lower than the current market price of around $50.

Note: P/E Multiples are based on Share Price at the end of the year, and reported (or expected) Adjusted Earnings for the full year

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