Publishing Lifts Martha Stewart

The company sees revenue of $270 million to $280 million in 2006.
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Updated from 8:21 a.m. EST

Martha Stewart Living

(MSO)

swung to a fourth-quarter profit thanks mainly to improvements in its publishing arm, and said 2006 revenue should build on the trend.

Martha Stewart Living earned $2.95 million, or 6 cents a share, in the quarter, compared with a loss of $7.33 million, or 15 cents a share, a year ago.

According to a company spokesman, Martha Stewart Living earned 19 cents a share in the latest quarter before stock-based compensation expenses. Three analysts surveyed by Thomson First Call produced a mean earnings estimate of 15 cents a share for the latest quarter.

Fourth-quarter sales rose 40% from a year ago to $84.5 million, topping the single-analyst estimate of $83 million compiled by Thomson First Call.

Shares rose 96 cents, or 5.8%, to $17.45 on Instinet early Wednesday. They're roughly unchanged on the year, and trade for roughly half the price they fetched as recently as late August.

By segment, publishing revenue rose 57.4% from a year ago to $41.1 million; merchandising revenue rose 18% to $28.0 million; broadcasting revenue rose 18% to $11 million, and Internet and direct commerce revenue fell 53% to $4.3 million.

Within publishing, advertising pages at

Martha Stewart Living

rose 133% in the quarter, while

Everyday Food

showed "more profitable circulation" and higher advertising revenue. Publishing's operating loss before interest, depreciation and amortization was $300,000 in the quarter, compared with $11.1 million a year ago.

"We currently expect the strong growth in ad pages and revenue to continue into 2006," the company said. "Based on current trends, we expect first-quarter advertising pages in

Martha Stewart Living

to increase approximately 70% year over year, resulting in a significant year-over-year improvement in this segment's results. Circulation trends continue to be strong, with renewal and new subscriber response rates at record highs."

Overall for the company, Martha Stewart Living expects to generate revenue of $60 million in the first quarter and an operating loss before interest, depreciation and amortization of $3 million to $3.5 million. For the year, the company sees revenue of $270 million to $280 million, and operating income before interest, depreciation and amortization of $10 million to $12 million.

One analyst surveyed by Thomson First Call was estimating first-quarter revenue of $62 million. Two analysts produced a mean 2006 revenue estimate of $272 million.

"We anticipate that all business segments will show year-over-year improvements in operating results," the company said. "Publishing will benefit principally from the higher advertising revenues and page growth, while Broadcasting will benefit from the revenues from the 'Martha' program as well as from Martha Stewart Living Radio. While our Internet business was profitable in the fourth quarter, we plan on reinvesting the incremental advertising revenue to build a more robust site that will lead to longer-term shareholder rewards."