Back in June 2011, Cablevision (NYSE:CVC) spun out AMC Networks (Nasdaq:AMCX) to its shareholders. AMC’s stock is around 12% since it started trading on its own, but is already outpacing the market and other media peers. Based off its past growth trends and for expectations that critically-acclaimed shows including “Mad Men,” “Breaking Bad” and “The Walking Dead” continue to pick up viewers, the stock looks poised to continue its strong run.
First Quarter Recap
Total revenues advanced 19.5% to $326.2 million. Domestic revenue jumped 20.1% to account for the vast majority of the total top line at 93.3%, and consisted of increased market penetration and advertising revenue from the namesake AMC and Sundance Channel cable television channels. AMC Networks receives fees from distributors, including cable providers such as Time Warner Cable (NYSE:TWC), Cox and Comcast (Nasdaq:CMCSA). It also works with around 1,000 advertisers. The balance consisted of international and other revenue, which grew a modest 3.8%.
Operating income jumped 37.3% to $97 million. AMC was saddled with a sizable debt load from Cablevision as part of the spinoff and reported nearly $30 million in interest expense for the quarter. Despite the hit to reported profits, static income tax expenses resulted in net income growth of 44.8% to $43.2 million, or 60 cents per diluted share. Free cash flow was even higher at $74.1 million, or approximately $1.03 per diluted share.
Outlook and Valuation
For the full year, analysts project total revenue growth of 10.1% and total revenues of $1.31 billion. They project profits of $2.36 per share, which puts the forward P/E at 13.2.
The Bottom Line
Last year, AMC Networks generated almost $240 million in free cash flow, which works out to $3.32 per dilute share, based off current diluted shares outstanding. This puts the trailing free cash flow in a much more reasonable territory at 11.9. Combined with a solid lineup of programs and the opportunity to increase the penetration of its channels, especially internationally, there is a solid chance that shareholders will continue to earn outsized gains by investing in the stock. Management is using the strength of its award-winning shows to build the brand recognition of its other channels, and there could be future development for both shows and channels going forward.
At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.