Scripps Networks Beats on Q1 Earnings - Analyst Blog

Scripps Networks Interactive Inc. SNI reported better-than-expected financial results for the first quarter of 2014. Quarterly GAAP net income stood at $128.3 million or 87 cents per share compared with $107.9 million or 72 cents per share in the prior-year quarter.

Earnings per share of 87 cents breezed past the Zacks Consensus Estimate of 81 cents. Quarterly total revenue of $643.8 million increased 8.3% on an annualized basis and was almost in line with the Zacks Consensus Estimate of $643 million.

The first-quarter 2014 gross profit came in at $462.6 million against $430.6 million in the prior-year quarter. Quarterly gross margin was 71.9% compared with 72.5% in the year-ago quarter.

Quarterly operating income increased 9% year over year to $239.6 million. Operating margin, in the reported quarter, was 37.2% against 37% in the prior-year quarter. In the reported quarter, Scripps Networks repurchased 3.1 million shares for a consideration of $250 million.

During the first quarter of 2014, Scripps Networks generated $218.3 million of cash from operations compared with $268.1 million in the year-earlier quarter. Free cash flow, in the reported quarter, was $209.1 million against $250.6 million in the prior-year quarter.

At the end of the first quarter of 2014, Scripps Networks had $509.1 million in cash & marketable securities and $1,384.6 million of outstanding debt on its balance sheet compared with $686.4 million in cash & marketable securities and $1,384.5 million of outstanding debt at the end of 2013. At the end of the reported quarter, the debt-to-capitalization ratio stood at 0.18 compared with 0.39 at the end of 2013.

Lifestyle Media Segment

Quarterly revenues came in at $623.5 million, reflecting an annualized growth of 7.6%. Within this segment, Advertisement revenues climbed 8.9% year over year to $426 million. Network Affiliate fee revenues were $190.2 million, up 6.3% year over year. Other revenues decreased 21.4% year over year to $7.3million. Total segment profit was $311 million, up 10.8% from the prior-year quarter.

Brand wise, HGTV revenues were approximately $227.2 million, up 10.6% year over year. Food Network revenues came in at $219 million, reflecting a 5.5% hike year over year. Travel Channel revenues totaled $79.7 million, up 4% year over year. DIY Network revenues were $35.1 million, up 10.6% year over year.

Cooking Channel revenues were $28.3 million, up 8.1% year over year. Great American Country revenues stood at $7.1 million, up 10.9% year over year. SN Digital revenues increased 5.9% year on year to around $24 million. Other revenues totaled $3.3 million, down 16.3% year over year.

Corporate Segment

Quarterly total revenue of $21 million was up 40.9% year over year. Operating loss in the segment was $40.2 million, up 21.6% year over year.

Guidance

Scripps Networks expects revenues for full-year fiscal 2014 to rise 6–8% while cost of service is anticipated to increase in the range of 11–13%. Likewise, selling, general and administrative costs are projected to remain flat or grow 2% year over year.

Other Stocks to Consider

Scripps Networks currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the media industry which warrant a look include Saga Communications Inc. SGA, LIN Media LLC. LIN and Entravision Communications Corp. EVC. All three stocks have a Zacks Rank #2 (Buy).

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