Martha Comes Up Short (MSO)

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Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) posted a net loss at -$0.07 EPS and said that excluding certain restructuring corporate expenses it would have seen a loss of -$0.01 EPS.  First Call was looking for a break-even quarter.  Unfortunately, the media company is guiding down revenues for Q4 and for fiscal 2008. 

The revenues came in with a 4% drop to $66.5 million, which areslightly above the $66.4 million expected.  But the company has guidedrevenues for the coming quarter at $83 million and guided fiscal 2008revenues to $295 million.  First Call has those estimates pegged at$89.6 million and over $303 million, respectively.

Operating income for the fiscal year, excluding $3.5 million in chargesfrom this last quarter, is expected to be about $7.5 million andadjusted EBITDA is expected to be about $23 million.  If we interpolatethe approximate 54.5 million shares we come up with operating income ofroughly $0.137 EPS for the year, which is still under estimates of$0.17.

Frankly, this looks like a turnaround which has not yet been able toturn.  In normal times we would say that Martha collapsed short of the finish line. But at the same time, this may be good enough to please thestreet in a bear market and a recession.  With no trades having beenseen yet, we’ll have to wait for the open before making any strongverdict here.  Its 52-week trading range was a new low yesterday at$5.10, while its 52-week high is $13.86.

Jon C. Ogg
October 28, 2008