NEW YORK (TheStreet) -- Shares of Madison Square Garden (MSG) - Get Report were gaining 4.7% to $84.50 after-hours Friday after the company announced it is spinning off its sports and entertainment businesses.
The new publicly traded spinoff will include the New York Knicks, the New York Rangers, the Madison Square Garden area, Radio City Music Hall, the Beacon Theater, and several other theaters. Live productions such as the Radio City Christmas Spectacular and the company's interest in Fuse media will also be included in the spin off.
The Madison Square Garden media company will continue to distribute sports and entertainment content following the spin off, including the MSG Network and MSG+. The company will enter into a long-term agreement with the new sports and entertainment company to continue local broadcasts of Knicks and Rangers.
Madison Square Garden expects the deal to close sometime during 2015.
TheStreet Ratings team rates MADISON SQUARE GARDEN CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate MADISON SQUARE GARDEN CO (MSG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 6.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 43.31% is the gross profit margin for MADISON SQUARE GARDEN CO which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 11.28% trails the industry average.
- MSG has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 34.27% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- MADISON SQUARE GARDEN CO's earnings per share improvement from the most recent quarter was slightly positive. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MADISON SQUARE GARDEN CO reported lower earnings of $1.47 versus $1.82 in the prior year. This year, the market expects an improvement in earnings ($2.93 versus $1.47).
- You can view the full analysis from the report here: MSG Ratings Report