Shares of media company Meredith Corporation (MDP) fell on Thursday, after it reported results for the third quarter of fiscal 2020. As of 1:30 p.m. EDT, the stock was down 9% for the day.
While the quarter started in line with management's expectations, advertising revenue fell in late March due to the COVID-19 pandemic. The disappointing quarter sent Meredith Corporation stock to fresh 52-week lows:
Meredith Corporation publishes magazines like People and websites like Allrecipes.com, and owns local TV news stations. Half of the company's revenue comes from selling advertising spots, and companies began trimming advertising budgets in March. Total advertising revenue for the quarter was $332 million, down 10% year over year.
Most the drop in advertising revenue is due to properties Meredith Corporation shut down during the last year. Only $17 million of the decline is attributable to actual cuts in advertising spending. That doesn't seem like much, until you remember it all came toward the end of the period.
However, there were a couple of silver linings. Traffic to its National Media Group websites increased 6% for the quarter. And revenue in its digital segment grew 27%. Still, these gains weren't enough to offset overall losses in consumer-segment revenue; that fell to $346 million, a decline of 5% from last year.
Total quarterly revenue was only down 6%, making today's drop look overdone. But Meredith Corporation management's recent actions paint a worsening picture. The company reduced management pay and cut capital expenditures. However, most telling is that it paused its dividend on April 20. The dividend had been raised annually and paid out every quarter for 27 consecutive years. While Meredith Corporation fell short of being a Dividend Aristocrat for other reasons, its payout history would have been enough to join the club. That's not a streak you give up lightly, a clear indication the business is struggling.
Advertising budgets are decreasing. And a weakening economy could hurt consumer-discretionary spending for things like magazines. In short, the coronavirus is a real headwind for Meredith Corporation, and the company could see continued challenges ahead. That's why the stock is down sharply today.