Meredith Corporation is battling declining EBITDA margin weighing on the stock. The company also faces threat from soft print media trends and stiff competition. Other companies witnessing the same headwinds are The New York Times Company (NYT Quick QuoteNYT - Free Report) , News Corporation (NWSA Quick QuoteNWSA - Free Report) and Garnett Co, Inc. (GCI Quick QuoteGCI - Free Report) . 

 

Meredith witnessed adjusted EBITDA margin contraction of 10 basis points (bps) to 20.3% in the fourth quarter, following a contraction of 240 bps to 17.1% in the preceding quarter. Persistence of this trend may pose a threat to the company’s bottom line. In line with this, management projects earnings per share from continuing operations for fiscal 2019 to be $2.78-$3.20, which is below the Zacks Consensus Estimate of $3.55.

 

Further, the company is exposed to headwinds from declining print media trends and shift from traditional advertising. Though the company is expanding its digital presence, it will take time to complete the metamorphosis. Additionally, stiff competition may impact Meredith's performance in near future.

 

 

The company is adopting several initiatives to accelerate growth. In this regard, it has been making investments, and undertaking acquisitions and partnerships. Meredith recently announced a definitive agreement to buy KPLR-TV for $65 million. The buyout is not expected to have any material effect on the company’s fiscal 2018 financial performance. Post the acquisition, Meredith will own 18 television stations (11% of U.S. television households).

 

Meredith’s strategic initiatives in digital space and brand licensing activities bode well. The company has recently acquired Time Inc. to expand its media portfolio. The combined entity is likely to create a diversified media and marketing company. Additionally, it is expected to join the leading national media brands, enhance Meredith’s digital capabilities and boost revenues from diversified channels. Meredith anticipates the deal to be accretive to free cash flow in the year of operation. Further, management expects to generate cost synergies of more than $500 million annually in the first two years of operations of the combined firm.

 

The company is also focused on restructuring plans. Evidently, Meredith offloaded Meredith Xcelerated Marketing to Accenture, recently. Furthermore, the company divested its Time Inc. UK to Epiris and announced plans to sell TIME, Sports Illustrated, Money, Fortune and affiliated media brands as well. Meredith is also exploring options for the sale of its equity investment in Viant. The company also intends to merge Eating Well and Cooking Light magazines that will strengthen its editorial portfolio. Additionally, the company has been trimming its headcount as part of the restructuring strategy.

 

 

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