New York Times shares drop more than 13% after subscriber-growth outlook

Q2 revenue rises 11% to $762.5 million, beating Wall Street expectations

The New York Times reported higher profit and revenue for the second quarter, but its shares tumbled more than 13% as the company forecast slower subscriber growth in the current quarter.

The company said it added about 280,000 net digital-only subscribers from the prior quarter, its smallest sequential increase in a year. It reported about 12.8 million digital-only subscribers at the end of the quarter, and nearly 13.4 million total subscribers.

Revenue climbed 11% to $762.5 million, topping Wall Street expectations for $752 million. Subscription revenue rose 12% to $537.9 million, as higher revenue from digital-only products offset lower domestic home-delivery and single-copy revenue. Advertising revenue grew 11% to $149.1 million, which the company attributed primarily to strong marketer demand and growth in advertising supply.

The company posted a quarterly profit of $93.4 million, or 57 cents a share, up from $82.9 million, or 50 cents a share, a year earlier. Stripping out one-time items, earnings were 69 cents a share. Analysts polled by FactSet expected adjusted earnings of 66 cents a share.

For the third quarter, the New York Times forecast total subscription revenue would increase 9% to 11% from the previous year and said it expected total advertising revenue to rise in the high-single-digit to low-double-digit percent range.

Douglas Arthur, an analyst at Huber Research Partners, said investors might have focused on increased expenses. Arthur also noted that the company’s outlook for 12% to 15% digital-subscriber revenue growth in the third quarter reflects a slight slowdown. He said he sees the stock drop as an overreaction.