Scripps Networks Interactive Inc. Earnings Jump 32% on Advertising Strength

By Markets Fool.com

HGTV's new show, Flip or Flop. Image source: Scripps Networks.

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Scripps Networks , the owner of popular TV channels HGTV and Food Network, posted fourth-quarter earnings results on Feb. 23. Sales and profits surged higher, powered by a booming international business and healthy advertising gains in the U.S. markets.

Here's how the headline figures stacked up against the prior-year period:

Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)

Revenue

$852 million

$669 million

27%

Net Income

$165 million

$132 million

25%

EPS

$1.27

$0.96

32%

Data source: Scripps' financial filings.

What happened this quarter?
The 27% sales spike was mostly due to higher revenue from Scripps' international networks, which posted a 500% jump to $163 million. That segment now accounts for 11% of sales, up from just 3% in 2014. Other highlights of the quarter included:

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  • Revenue in the U.S. improved by 8%, compared to a 6% uptick in Q3. The difference was advertising, which jumped 8% higher this quarter (compared to 5% in Q3). That's enough to trounce rival Discovery Communications' , whose ad sales rose by 5% in Q4. For the full year, Scripps' U.S. advertising business rose 4%, edging out Discovery's 3% gain.
  • Profit on the U.S. side rose at a much slower pace than revenue, though, which pushed the segment's operating margin down to 44% from 47% a year ago.
  • HGTV was again Scripps' standout performer, with revenue up 8% for the quarter and 7% for the year.
  • Travel Channel posted the smallest percentage gain out of the network's biggest channels, and it was the only brand to see lower sales in 2015.

What management had to say
"These results exemplify the strong and consistent execution of our strategy," CEO Kenneth Lowe said in a press release. "Our core television lifestyle networks are growing in demand by viewers and advertisers, while our international expansion continues to make a significant contribution to the overall robust health of the company," he said.

The key to Scripps' market-beating growth this quarter was "strong advertising demand" for its portfolio of brands, executives said, which allowed the company to raise its ad pricing. That growth, especially from the HGTV, Food Network, and DIY Network channels, was partially offset by weak results at the Travel Channel.

Looking forward
In response, executives are repositioning the Travel Channel brand and have installed new leadership at the top of the struggling network. Other key challenges they'll have to face include fast-rising programming costs and hefty integration expenses tied to merging Scripps' operations with Polish media giant TVN. Together, these issues will likely put pressure on profitability over the next year.

But there's no question that Scripps is enjoying strong viewership momentum heading into 2016. In fact, all six of its major U.S. networks posted "increasing impressions in January compared to the same period in 2015," management said, suggesting the media giant's healthy growth pace could hold even as TV watching splinters away from traditional linear broadcasting. "Every day we are increasing the number of connections [our] brands make with consumers around the world. As a result, we're well positioned to maximize the value we can generate from the audiences we deliver across multiple platforms," Lowe explained.

The article Scripps Networks Interactive Inc. Earnings Jump 32% on Advertising Strength originally appeared on Fool.com.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Discovery Communications. The Motley Fool recommends Scripps Networks Interactive. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.