The New York Times Company

February 11, 2015

The New York Times Company

(NYT-NYSE)

Current Recommendation Prior Recommendation Date of Last Change

Current Price (02/10/15) Target Price

NEUTRAL

Outperform 02/11/2015

$14.07 $15.00

SUMMARY DATA

52-Week High 52-Week Low One-Year Return (%) Beta Average Daily Volume (sh)

Shares Outstanding (mil) Market Capitalization ($mil) Short Interest Ratio (days) Institutional Ownership (%) Insider Ownership (%)

$17.26 $11.22

-0.40 1.52 772,039

150 $2,115

21.51 76 7

Annual Cash Dividend Dividend Yield (%)

5-Yr. Historical Growth Rates Sales (%) Earnings Per Share (%) Dividend (%)

$0.16 1.14

-9.6 -13.3

N/A

P/E using TTM EPS

32.7

P/E using 2015 Estimate

28.1

P/E using 2016 Estimate

27.1

Zacks Rank *: Short Term 1 3 months outlook

3 - Hold

* Definition / Disclosure on last page

? 2015 Zacks Investment Research, All Rights reserved.

SUMMARY

The New York Times Company registered an increase in digital subscribers and a rise in both circulation and digital advertising revenues that led to better-than-expected fourth-quarter 2014 results. However, these failed to offset the soft print advertising demand and rise in operating costs that resulted in 10.3% decrease in earnings per share. Management hinted that total advertising revenue in first-quarter 2015 would decline in the mid single-digit range. To mitigate this, the company is diversifying its business, adding new revenue streams, strengthening its balance sheet and restructuring its portfolio. It has offloaded assets that bear no direct relation with the core operations in order to re-focus on its core newspapers and pay more attention to its online activities. The company is contemplating on introducing a new line of digital products and services to lessen its dependency on traditional advertising. Currently, we stay Neutral on the stock.

Risk Level *

Type of Stock Industry Zacks Industry Rank *

Average,

Mid-Blend Publishing-Newspapers

72 out of 267

ZACKS CONSENSUS ESTIMATES

Revenue Estimates

(In millions of $)

Q1

Q2

(Mar)

(Jun)

2013 2014 2015 2016

381 A 390 A 385 E

391 A 389 A 387 E

Q3 (Sep)

362 A 365 A 363 E

Q4 (Dec)

444 A 445 A 442 E

Year (Dec)

1,577 A 1,589 A 1,577 E 1,581 E

Earnings Per Share Estimates

(EPS is operating earnings before non-recurring items, but including employee stock options expenses)

Q1

Q2

Q3

Q4

Year

(Mar)

(Jun)

(Sep)

(Dec)

(Dec)

2013

$0.08 A

$0.13 A

$0.01 A

$0.29 A

$0.52 A

2014

$0.07 A

$0.07 A

$0.03 A

$0.26 A

$0.43 A

2015

$0.07 E

$0.10 E

$0.05 E

$0.28 E

$0.50 E

2016

$0.52 E

Quarterly figures may not add up to annuals due to rounding off & divestiture

activities.

Projected EPS Growth - Next 5 Years %

N/A



10 S. Riverside Plaza, Chicago IL 60606

OVERVIEW

Founded in 1896 and headquartered in New York City, New York, The New York Times Company (NYT) operates as a diversified media company that comprises newspapers, Internet businesses, investments in paper mills and other investments. The company now comprise of The New York Times Media Group.

The New York Times Media Group: The segment includes The New York Times, a daily and Sunday newspaper; the International Herald Tribune, a daily newspaper; and other related ventures, which comprise Digital Archive Distribution and The New York Times News Services Division. It also circulates content on other digital platforms, such as mobile applications, social networking sites, and reader application products. The International Herald Tribune has been rebranded as the International New York Times.

The company s other investments include a 49% interest in a Canadian newsprint company, Donohue Malbaie; and a 40% interest in a Madison Paper Industries.

On January 6, 2012, The New York Times Company completed the sale of Regional Media Group part of News Media Group consisting of 16 regional newspapers, print publications and associated ventures

to Halifax Media Holdings LLC, the proprietor of The Daytona-Beach News Journal in Florida, for approximately $140 million in cash. The New York Times Company on September 24, 2012 completed the sale of About Group, which it acquired in 2005, to InterActiveCorp for a consideration of $300 million. In October 2012, the company sold its stake in , a job portal, for approximately $167 million.

On October 24, 2013, it completed the sale of New England Media Group, including The Boston Globe and its allied properties to an acquisition company spearheaded by John W. Henry, who owns Fenway Sports Group, for about $70 million in cash.

REASONS TO BUY

Diverse Revenue Streams: The New York Times Company has been adding diverse revenue streams, which include a circulation pricing model and a pay-and-read model for and the International New York Times, to make it less susceptible to the economic conditions. The company is also adapting to the changing face of the multiplatform media universe, which currently includes mobile, social media networks and reader application products in its portfolio. The company wishes to launch lower-priced as well as premium subscription based model to target different masses according to their appetite, and emphasize on online video production and brand extension. The company launched new subscription based digital products such as NYT Now, Times Premier and Cooking product.

To Read Please Subscribe: The company fixed monthly charge of $15 for accessing articles over the restricted number on its website and a smartphone application; $20 for unlimited access online and on Apple Inc.'s iPad tablet computer application; and $35 for online, smartphone and iPad application. Moreover, the company introduced a plan of $0.99 under which one will be able to enjoy all digital offerings for one month. Online visitors are not able to access more than 10 free articles per month. Mobile app users will now be able to access a maximum of three articles per day from over 25 sections, blogs and slideshows, before being asked to subscribe. Earlier, the users only had access to the Top News segment, unlike subscribers who could enjoy content beyond the prescribed limit. However, the video content remains free for all.

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Circulation Revenue on the Rise: What came as a catalyst during the fourth quarter of 2014 was a rise in circulation revenue. Circulation revenue increased 1.4% to $210.6 million primarily on its digital subscription initiatives and rise in the home delivery price of The New York Times. Circulation revenue from digital-only subscription packages jumped 13.6% to $44.5 million. Management now projects total circulation revenue in the first quarter of 2015 to increase at a rate in line with the quarter under review.

Concentrating on Cost Containment Efforts: In an effort to offset the declining revenue and shrinking market share, publishers are scrambling to slash costs. The New York Times Company has been realigning its cost structure and streamlining its operations to increase efficiencies, which have contributed to improved operating performance. The New York Times Company reported better-thanexpected fourth-quarter 2014 results. The quarterly earnings came in at $0.26 per share that beat the Zacks Consensus Estimate of $0.23, while top line of $444.7 million also surpassed the Zacks Consensus Estimate of $437 million.

Offloading Assets to Focus on Core Operations: As a part of its ongoing strategy to completely offload assets that bear no direct relation with the core operations, The New York Times Company divested its remaining stake (210 Class B units) in the Fenway Sports Group in May 2012. The company also completed the sale of Regional Media Group to re-focus on its core newspapers and pay more attention to its online activities. The company in September 2012 completed the sale of About Group, and in October sold its stake in . The company in October 2013 completed the sale of New England Media Group, including The Boston Globe and its allied properties to an acquisition company spearheaded by John W. Henry, who owns Fenway Sports Group. Additionally, the company had earlier announced that it will offload its 49% stake in Metro Boston.

REASONS TO SELL

Advertising an Inherent Risk: Advertising remains a significant source of revenue for the company, which in turn depends upon the health of the economy. The macro-economic factors such as sluggishness in business spending, high unemployment and falling home sales may adversely affect the level of national, retail and classified advertising revenues, as advertisers cut their budget in response to weak economic conditions. Total advertising revenue during the fourth quarter of 2014 dropped 2.1%. The company hinted that total advertising revenue in first-quarter 2015 would decline in the mid-single-digit range. This may keep investors wary.

Competition a Major Threat: The New York Times Company faces stiff competition for advertising and circulation from other newspapers, magazines, websites, television, radio, and other forms of media on the attributes of audience reach and demographics, price, service and advertising results. Consequently, there is a fear of market share loss, and this may adversely affect its top and bottom lines growth.

Rise in Newsprint Prices May Upset margins: Newsprint prices remain volatile. If newsprint prices shoot up or newsprint supply is disrupted, operating results will be adversely impacted.

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RECENT NEWS

NY Times Q4 Earnings Beat Estimates on Digital Advertising February 3, 2015

The New York Times Company reported better-than-expected fourth-quarter 2014 results. Quarterly earnings came in at $0.26 per share that beat the Zacks Consensus Estimate of $0.23. The strength witnessed across digital advertising supported the bottom line. However, higher operating costs led to a 10.3% decline in earnings per share.

Including one-time items, the company posted earnings of $0.22 per share, down substantially from $0.41 in the prior-year quarter.

In the reported quarter, The New York Times Company registered an increase in the number of its digital subscribers and a rise in both circulation and digital advertising revenues. However, the quarter saw a decline in print advertising revenue and an increase of 0.4% in adjusted operating costs. Management now expects adjusted operating costs to remain almost flat year over year in the first quarter of 2015.

The New York Times Company s top line inched up 0.2% year over year to $444.7 million, following an increase of 0.8% in the previous quarter. Revenues also surpassed the Zacks Consensus Estimate of $437 million.

Circulation revenue increased 1.4% to $210.6 million primarily on the company s digital subscription initiatives and rise in the home delivery price of The New York Times. Circulation revenue from digitalonly subscription packages jumped 13.6% to $44.5 million. Management now projects total circulation revenue in the first quarter of 2015 to increase at a rate in line with the quarter under review.

Total advertising revenue came in at $207.6 million, down 2.1% year over year. Print advertising revenue declined 9.2%, while digital advertising revenue climbed 19.3% to $63.2 million. The company saw a decline of 2.2% and 3.8% in the display and classified advertising categories, respectively. The diversified media conglomerate hinted that total advertising revenue in first-quarter 2015 would decline in the mid single-digit range.

Total adjusted operating profit edged down 0.5% to $103.9 million, while adjusted operating margin contracted 10 basis points to 23.4%.

Other Financial Aspects

The New York Times Company ended the quarter with cash and marketable securities of about $981.2 million, and total debt and capital lease obligations of approximately $650.1 million. The company incurred capital expenditures of about $12.4 million during the quarter. Management now foresees total capital expenditures between $35 million and $45 million for 2015.

Conclusion

Advertising, which remains a significant source of revenue, is largely dependent on the global financial health. Softness in advertising demand has been weighing on The New York Times Company s performance. Consequently, the company is trying every means to shield itself from the impact of an unstable market and contemplating on new revenue generating avenues. The company has also been offloading assets that bear no direct relation to its core operations in order to re-focus on its core newspapers and pay more attention to its online activities.

The New York Times Company has been adding diverse revenue streams, such as a pay-and-read model, to make it less vulnerable to economic conditions. The company is also adapting to the changing

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face of the multiplatform media universe, and has already included mobile and reader application products in its portfolio. Other publishing companies such as Journal Communications, Inc. (JRN), The E.W. Scripps Co. (SSP) and Gannett Co., Inc. (GCI) are also trying to adapt to different means of revenue generation.

Despite hiccups in the economy, what still promises revenue generation is The New York Times Company s pricing system for , which was launched on Mar 28, 2011. The company notified that the number of paid digital subscribers reached 910,000 at the end of the reported quarter, rising 35,000 sequentially and almost 20% year over year.

The New York Times Company remains committed to streamline its cost structure, strengthen its balance sheet and rebalance its portfolio.

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