Meredith Sees Local Gains Despite Weak Core

Television is the primary component of Meredith Corp.’s Local Media Group, and it is expecting to produce a healthy gain in revenue in what is the group’s fiscal fourth quarter, now in progress. But it won’t be thanks to robust core advertising.

Chairman-CEO Steve Lacy said that looking forward, the Local Media Group’s core advertising is pacing down low- to mid-single digits. On the plus side, automotive is pacing up, as are food and home, while professional services and fast food restaurants are dragging.

Despite the softness in core, CFO Joe Ceryanec said that the local media group is expecting a mid-single digit fiscal 4Q gain. Though not discussed specifically in the company’s announcement today of its fiscal 3Q results or during the following conference call, the core offset would have to come in from gains in the retransmission consent and/or digital categories.

Local Media Group President Paul Karpowicz speculated that the slow rebound in core was possibly a hangover from the 2016 election cycle. “I think as an industry we did a pretty good job of talking traditional advertisers into being off the air during the political season. A lot of traditional advertisers just stayed out of the market.

“Now that the election is over, it’s time to get everybody back, engaged, and I think a lot of people have just been sitting out,” Karpowicz continued. “I think there’s been a degree of uncertainty about the new administration and what’s going on.”

Lacy added: “There’s more weakness on the national side than the local side — the local side is pacing better — and I think that makes sense as well, because what really drives people into the car dealership on Saturday is the local advertising.”

Asked if television execs did too good a job encouraging advertisers to avoid the election cycle, Lacy said TV remains essential to advertisers, focusing on auto dealers, and concluded: “Two or three months of the new calendar year doesn’t necessarily make a trend.

Shortfalls in political and core during the just-completed fiscal third quarter were offset by gains in retransmission consent and digital, resulting in a modest 3Q gain of 1%, but the company was facing a headwind that will not hamper results for the 4Q reporting period, that being the move of the Super Bowl from CBS, where Meredith is well-represented, to Fox, where it is not.

Lacy said M&A is expected to open up in the wake of the spectrum auction and with the likely advent of ownership deregulation, and said that Meredith will be carefully watching events in the M&A marketplace. “We have been very successful before picking up stations, and especially when there have been major transactions come together where there are overlaps, to … in a secondary manner … pick up some wonderful properties as we did in St. Louis and our second station in Phoenix and others.”

Speaking from the NAB Show in Las Vegas, Karpowicz said ownership deregulation was a hot topic, but noted it wouldn’t likely have a huge impact on Meredith’s M&A approach. “[W]e have been very disciplined relative to our acquisition strategy, and traditionally and I think on the go-forward basis we will continue to be very disciplined.”

Karpowicz outlined Meredith’s ongoing M&A strategy, saying, “We pretty much look at the top 60 markets, primarily big four affiliates — ABC, NBC, CBS and Fox — we’re always looking for opportunities with second stations to add to our existing stations in-market. A good example is what we just did with Peach TV.” (It received FCC approval last week of its purchase of WPCH Atlanta from Time Warner for $70 million.)

Karpowicz noted that the company was watching developments on the dereg side, but for the time being is thinking about M&A in terms of the existing rules. And both execs said that Meredith is not a company that will consider an acquisition simply to add scale.

Lacy cast out some bait for investors, saying, “during the fiscal third quarter, we were pleased to be added to the S&P High Yield Dividend Aristocrat Index as an acknowledgment of our consistent record of annual dividend increases.”

Ceryanec explained, noting the company’s record of paying dividends for 70 consecutive years and increased dividends for the past 24. He also said that the company is continuing to invest in shares of its own stock and has $70 million available for that purpose.