E AMC Networks: Sell-Off Presents Opportunity

We have closely been following AMC Networks (AMCX) for some time. The stock has suffered over the last 52-weeks, and is currently down 25.1% from the highest levels seen during the period:

(Click on image to enlarge)

Source: Yahoo Finance

In this column, we check back in on the company to help determine if there is a possible turnaround in the stock’s future. To make this determinization we will examine recent revenue patterns, earnings and discuss projections for 2018.

Revenues take a hit

It has been a struggle for AMC. Fourth quarter net revenues decreased 0.4%, or $3 million, to $727 million over the fourth quarter of 2016. The decrease in net revenues reflected a decrease of 1.3% at the National Networks segment and an increase of 6.9% at the International and Other segment. Given strong expense management and lower losses internationally, operating income got a bump, which was a hidden positive in the quarter.

Operating income

Given the moves we saw in the top line, and factoring in expenses which moved higher, operating income was $162 million, an increase of 55.7%, or $58 million, versus the prior year period.  The operating income increase reflected a decrease of 6.5% at National Networks segment offset by a decrease of 77.6% in operating loss at International and Other segment. But this is a GAAP number, and consisted of a big charge last year.

It is important to understand that the improvement in operating income was primarily related to the absence of $68 million in charges incurred last year in connection to AMC Networks International – Digital Media Center, which was subsequently sold in July 2017.

As such, when accounting for these items, adjusted operating income totaled $206 million, a decrease of 3.4%, or $7 million, versus the prior year period. Much of the decline is still driven by National Networks, which saw segment adjusted operating income decrease 5.2%. Still, there was true improvement at the International and Other segment as adjusted operating income increased 32.2% versus the prior year period.

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