SUMMARY. Risk Level * A 361 A 370 A 387 A 1,471 A A 354 A 367 A 391 A 1,469 A A 399 A 401 E 437 E 1,606 E ,627 E

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1 March 20, 2015 Meredith Corporation Current Recommendation Prior Recommendation Neutral Date of Last Change 12/22/2014 Current Price (03/19/15) $56.08 Target Price $62.00 SUMMARY DATA OUTPERFORM 52-Week High $ Week Low $42.33 One-Year Return (%) Beta 1.18 Average Daily Volume (sh) 257,726 Shares Outstanding (mil) 45 Market Capitalization ($mil) $2,497 Short Interest Ratio (days) Institutional Ownership (%) 80 Insider Ownership (%) 11 SUMMARY Risk Level * (MDP-NYSE) Favorable advertising trends, strength in the digital section and favorable outcome of recent acquisitions continue to aid Meredith s quarterly results. The company s second-quarter fiscal 2015 earnings of $1.00 per share grew 45% year-over-year and also outdid the Zacks Consensus Estimate, marking the fifth consecutive quarter of earnings beat. On the revenue front too, the company delivered a notable performance as the top-line grew 13% and surpassed the Zacks Consensus Estimate. We believe the company s strong portfolio of women s magazines helps in gaining market share. Further, Meredith is focused on bolstering advertising revenues, primarily in the digital space, and is increasingly concentrating on brand licensing, marketing services and e-commerce. Given the sound fundamentals, we retain the Outperform recommendation. Low, Type of Stock Mid-Blend Industry Publishing-Periodicals Zacks Industry Rank * 70 out of 267 ZACKS CONSENSUS ESTIMATES Revenue Estimates (In millions of $) Q1 Q2 Q3 Q4 Year (Sep) (Dec) (Mar) (Jun) (Jun) Annual Cash Dividend $1.83 Dividend Yield (%) Yr. Historical Growth Rates Sales (%) 1.8 Earnings Per Share (%) 4.7 Dividend (%) 17.1 using TTM EPS 17.4 using 2015 Estimate 16.9 using 2016 Estimate A 361 A 370 A 387 A 1,471 A A 354 A 367 A 391 A 1,469 A A 399 A 401 E 437 E 1,606 E ,627 E Earnings Per Share Estimates (EPS is operating earnings before non-recurring items, but including employee stock options expenses) Q1 Q2 Q3 Q4 Year (Sep) (Dec) (Mar) (Jun) (Jun) 2013 $0.55 A $0.89 A $0.72 A $0.75 A $2.91 A 2014 $0.53 A $0.67 A $0.70 A $0.88 A $2.80 A 2015 $0.65 A $1.00 A $0.69 E $0.94 E $3.31 E 2016 $3.19 E Zacks Rank *: Short Term 1 3 months outlook 2 - Buy Projected EPS Growth - Next 5 Years % 5 * 201 Definition Zacks / Investment Disclosure on Research, last page All Rights reserved S. Riverside Plaza, Chicago IL 60606

2 OVERVIEW Founded in 1902 and headquartered in Des Moines, IA, Meredith Corporation (MDP) is one of leading media and marketing company in the U.S. with interests in publishing, broadcasting, integrated marketing and interactive media. The company reports through 2 segments National Media Group and Local Media Group, which were known as the Publishing Group and Broadcasting Group prior to fiscal National Media Group Meredith publishes approximately 21 subscription magazines and approximately 120 special interest publications under approximately 80 titles. The company focuses on the home and family markets, publishing familiar titles such as Better Homes and Gardens, Family Circle, Parents, American Baby, and more, thus reaching out to the maximum number of female readers. In spring of fiscal 2015, Meredith will be launching magazine Parents Latina to target U.S. Hispanic population. Meredith, through its publications, has been focusing on Hispanic women and its repertoire includes Siempre Mujer and Ser Padres. Meredith extended its contract with Wal-Mart through 2016, which includes an expansion of the Better Homes and Gardens branded home decor and garden program at Wal-Mart stores across the United States and Canada. The company also agreed to license its Better Homes and Gardens real estate brand to Realogy Corporation. In fiscal 2013, Meredith acquired Parenting and Babytalk magazines and related digital assets from The Bonnier Corporation. Earlier, in 2011, Meredith acquired Every Day with Rachael Ray the awardwinning magazine of Reader's Digest Association, and assets of FamilyFun: Magazine in Jan The company also acquired EatingWell Media Group in Jul In May 2012, Meredith acquired ShopNation Inc., an e-commerce technology company based in Los Angeles. In Mar 2012, Meredith acquired the world's No. 1 digital food site, Allrecipes.com for approximately $175 million by entering into a deal with Reader's Digest Association. The segment has extensive digital presence with over 40 websites, almost 30 mobile-optimized websites, and nearly 20 applications. Local Media Group The broadcasting segment owns, and operates network-affiliated television stations located across the U.S. and one operated television station. The segment also includes 12 websites, 2 mobile-optimized websites, and 27 applications. Meredith completed the buyout of WALA-TV, the FOX affiliate in the Mobile Pensacola market. Earlier, the company had acquired KMOV-TV, the CBS affiliate in St. Louis and KTVK, an independent station in Phoenix. In June this year, Meredith entered into a deal to buy WGGB-TV, the ABC affiliate in Springfield. Meredith currently owns or operates 17 television stations and covers more than 11% of U.S. television households. In Mar 2015, the company offloaded BetterRecipes.com to June Media. Equity Research MDP Page 2

3 REASONS TO BUY Digital Advertising Revenues Continue to Skyrocket: The quarter under review saw a 45% yearover-year surge in digital revenues mainly driven by acquisitions and organic growth. Aggressive marketing also contributed to higher revenues. Segment wise, digital revenues grew 45% and 50%, at National and Local media, respectively. In the second quarter, digital and mobile traffic was 70 million unique visitors per month. Moreover, Magazine Media 360 Brand Audience Report found that National Media s monthly audience reach grew 20% year over year to 230 million across digital, mobile, video and print. In the first quarter it grew 8% to 180 million. These are very important developments as the company battles declining print media trends. Acquisitions Driving Growth: In order to expand its media portfolio the company has been looking to make strategic investments as well as acquisitions and partnership deals. Along with the earnings announcement, management stated that it will be acquiring Shape magazine and the digital assets of Shape, Natural Health, and Fit Pregnancy brands from American Media Inc. The company s also struck a recent 10-year deal with Martha Stewart Living Omnimedia, under which it acquired the rights to Martha Stewart Living and Martha Stewart Weddings magazines and the and websites, effective Nov 1, While Meredith will take control of advertising, sales, marketing, circulation, production and other noneditorial functions, the content will still be provided by Martha Stewart's editorial team. Buoyed by recent acquisitions, including that of Shape and media properties of Martha Stewart Living Omnimedia, management raised its earnings per share guidance for fiscal The company now expects earnings to be around $3.25 to $3.35 up from the earlier forecast of $3.00 to $3.25. Meredith s other acquisitions in the past include Parenting and Babytalk magazines and related digital assets as well as Every Day with Rachael Ray and assets of FamilyFun magazine. It also acquired the world's No. 1 digital food site, Allrecipes.com to expand its digital platform. Meredith also launched Meredith Women's Network mostly covering women-related topics. Meredith also acquired the broadcast assets of WALA, the Fox affiliate in Mobile-Pensacola. The recent acquisition is seen as part of Meredith s strategy of expanding its television station portfolio, and will enhance the company s earnings for the second half of fiscal 2015 and in fiscal Earlier, the company had acquired MOV in St. Louis, KMOV-TV, the CBS affiliate in St. Louis and KTVK, an independent station in Phoenix. In June 2014, Meredith entered into a deal to buy WGGB-TV, the ABC affiliate in Springfield for $53.8 million. We believe that these measures not only fortify its position but also facilitate in generating considerable digital advertising revenues. Expansion of Brands: Meredith through strategic alliances leverages its brands, which supplement the sales of the company. The company extended its contract with Wal-Mart through 2016, which includes expanding Better Homes and Gardens branded home decor and garden program at Wal- Mart stores across the U.S. and Canada. The company entered into agreements in Turkey and Italy to widen the reach of its renowned brands, such as Better Homes and Gardens, Parents and More, and Allrecipes.com. Moreover, the company is aggressively expanding its brands through online platforms, televisions, videos, mobile applications, and broadening its range of food and lifestyle content. Alongside, it renewed the long-term affiliation agreements with CBS and Fox. We believe these measures will help the company in reducing its dependency on traditional advertising and provide ample growth opportunities to increase its revenue generating capabilities. Shareholder-Friendly Moves: We believe Meredith remains an attractive option for investors seeking both growth and income. By its Total Shareholder Return (TSR) strategy, the company intends to boost shareholder value through dividends, share repurchases and strategic investments in business to drive growth. The company has a long-standing history of stable dividend payouts running for 67 years. Moreover, Meredith has increased its dividend nearly 70% over the last three Equity Research MDP Page 3

4 years, which now stands at $1.83 per share annually. During fiscal 2014 the company has bought back 1.6 million shares while in the first half of fiscal 2015 it bought back 727,000 shares. Growth Initiatives: Meredith boasts a strong portfolio of women s magazines, which helps it gain market share. The company remains focused on bolstering advertising revenue, primarily in the digital space; enhancing online consumer transactions, especially magazine subscription orders; and non-advertising depending activities including brand licensing, marketing services and e-commerce, and attaining operational efficiencies. RISKS Declining Print Media Trends: With advancing technology, the print media is on a decline. Shift to online has put an enormous pressure on Meredith s magazine portfolio. Though the company is expanding its digital presence, it will take time to complete the metamorphosis. Advertising, an Inherent Risk: More than half of the company s revenues are derived from advertising, which in turn depends upon the health of the economy, as during recession, the demand for advertising waned. Although the economy is gradually recovering, National Media and Local Media Groups revenues still remain susceptible to fluctuations in demand for advertising. In fiscal 2014, nearly 53% of revenues were generated through advertising. National media revenues and Local Media revenues had a 45% and 73% contribution from advertising. Risk of Fluctuations in the Prices of Paper and Postage: Paper and postage costs, which account for a substantial portion of the publishing segment's operating costs, include cost to produce, distribute, and market printed products. A significant fluctuation in the prices of paper and postage may upset the company s bottom line. In fiscal 2014, paper and postage accounted for 22% of National Media's operating costs. Competition Poses a Threat: In the recent years, Meredith faced stiff competition across its magazine, books and related publishing products as well as at its television and radio stations with other mass media, including the Internet and other broadcasting stations, in the arenas of advertising rates, circulation levels, and reader demographics. This may weigh upon the company s top and bottom line results. RECENT NEWS Meredith Corp. Beats on Q2 Earnings, Raises Outlook Jan 28, 2015 Meredith Corp. reported adjusted earnings of $1.00 per share for the second quarter of fiscal 2015, ahead of the Zacks Consensus Estimate of $0.98 and up 45% on a year-over-year basis. Including certain one-time items, the company reported earnings of $0.87, up 30% year over year. The company continues to gain from improvement in advertising trends, especially political, with sustained strength seen in the digital section and favorable outcome from the recently acquired assets. Along with the earnings announcement, management stated that it will be acquiring Shape magazine and the digital assets of Shape, Natural Health, and Fit Pregnancy brands from American Media Inc. Equity Research MDP Page 4

5 Buoyed by recent acquisitions, including that of Shape and media properties of Martha Stewart Living Omnimedia, management raised its earnings per share guidance for fiscal The company now expects earnings to be around $3.25 to $3.35 up from the earlier forecast of $3.00 to $3.25. Further, third-quarter earnings are expected to be in the range of $0.66 to $0.71 compared with adjusted earnings per share of $0.70 reported in the prior-year quarter. Revenues & Margins Total revenue for the quarter grew 13% to $399 million and surpassed the Zacks Consensus Estimate of $393 million. Top-line growth was driven by a 25% increase in Advertising revenues to $241.4 million and 5.62% growth in Other revenues to $98 million, offset by a 12.2% decline in Circulation revenues to $59.5 million. For the third quarter of fiscal 2015, total revenue is anticipated to increase in the high-single digits range. Adjusted operating profit was up 13.7% year over year to $78.3 million Segment Details Meredith s National Media Group revenues fell 2.9% year over year to $242.4 million due to a 12.2% decline in Circulation revenues to $59.5 million, partly offset by 1.9% rise in adverting revenues. The segment s adjusted operating profit increased 7% to $30.2 million. Meredith now projects National Media Group revenues to increase in low single digits in the third quarter of fiscal Meredith s Local Media Group revenues rose nearly 50% to $156.5 driven by acquisition of MOV in St. Louis, KTVK in Phoenix and WGGB in Springfield and higher retransmission fees. Also, in the quarter, non-political advertising revenues grew 21.8% to $95.3 million, while political advertising revenues were substantially higher at $29 million. The segment s adjusted operating income grew over 64% to $60 million. Management now expects Local Media Group s revenues to increase 25% 30%. Meredith s Growth Catalysts Meredith boasts of a strong portfolio of women s magazines, which helps it in gaining market share. Further, the company is focused on bolstering advertising revenues, primarily in the digital space, and is increasingly concentrating on brand licensing, marketing services and ecommerce to counter possible economic downturns. On Jan 7, 2015, Meredith acquired New York-based digital advertising company Selectable Media for an undisclosed amount. Meredith stands to benefit from Selectable Media's forte in digital video and branded content distribution. Moreover, Selectable Media s impressive customer base including prominent clients like PetSmart Inc., Merck & Co. Inc. and Capital One Financial are expected to unlock significant opportunities for this Des Moines, IA-based media company while increasing the scope for its existing clients. On Dec 22, 2014, Meredith announced that it has concluded the buyout of WALA-TV, the FOX affiliate in the Mobile Pensacola market. The company acquired the television station from Media General, Inc. for an amount of $86 million. Equity Research MDP Page 5

6 On Oct 15, 2014, Meredith acquired the rights to Martha Stewart Living and Martha Stewart Weddings magazines and the and websites, effective Nov 1, Under the deal, which spans 10 years, Meredith will take control of advertising sales, marketing, circulation, production and other non-editorial functions, while the content will still be provided by Martha Stewart's editorial team. In Dec 2013, Meredith agreed to buy television stations in Phoenix and St. Louis from Gannett Co. Inc. and Sander Media LLC, for $407.5 million in cash, to enhance its television portfolio. Under the deal, Meredith acquired KTVK, an independent station in Phoenix; KASW, the CW affiliate in Phoenix; and KMOV, the CBS affiliate in St. Louis. In Nov 2013, Meredith launched Allrecipes magazine, the media industry's most important print extension of a digital brand. Advertising interest has been strong, with Procter and Gamble, Hershey as well as General Motors making commitments. Meredith is also an ideal pick for yield-seeking investors. The company, through its total shareholder return (TSR) strategy, intends to boost shareholder value through dividend payouts, share repurchases and strategic investments in business to drive growth. Since the implementation of this strategy in October 2011, the company has hiked its dividend by 70% and initiated a $100 million share repurchase program. The company has a history of regularly paying dividends. Over the last two decades, it has increased its dividend consistently, which now stands at $1.73 per share. The company s last dividend hike of 6% was in Feb Moreover, the company constantly seeks to venture into new arenas and add alternative revenue generating channels through strategic acquisitions and collaborations. Meredith s contract with Wal-Mart Stores Inc. includes an expansion of the Better Homes and Gardens-branded home decor and garden program at Wal-Mart stores across the United States and Canada. The company s brand licensing revenues rose considerably in the quarter on account of continued robust sales of more than 3,000 SKU's of Better Homes and Gardens' approved products at more than 4,000 Wal-Mart outlets across the U.S. Other Financial Details Meredith ended the year with cash and cash equivalents of $18.1 million, long-term debt of $796.3 million and shareholders equity of $923.1 million. The company s leverage ratio (debt to EBITDA) was 2.9 to 1 for the 12 month-period ended Dec 31, Share Repurchase Update During the quarter, the company bought back 362,000 shares. As of Jan 28, 2015, Meredith had $98 million worth of shares remaining under its existing share repurchase authorization. Dividend Update On Mar 13, 2015, Meredith paid a quarterly dividend to $ per share. The company had hiked its dividend in Feb 2015 by 6% bringing the total annual dividend to $1.83 per share. Equity Research MDP Page 6

7 VALUATION Meredith Corporation s current trailing 12-month earnings multiple is 17.4X, compared with 46.9x for industry average and 18.3x for the S&P 500. Over the last 5 years, Meredith Corporation s shares have traded in a range of 8.4X to 19.4X trailing 12-month earnings. The stock is trading at a discount to the industry average, based on 2015 earnings estimate and at a premium based on 2016 earnings estimates. Our target price of $62.00, 18.7X 2015 EPS, reflects this view. Key Indicators F1 F2 Est. 5-Yr EPS Gr% P/CF 5-Yr High 5-Yr Low Meredith Corporation (MDP) Industry Average S&P JOBS INC-ADR (JOBS) N/A Martha Stewart Living Omnimedia Inc. (MSO) N/A TTM is trailing 12 months; F1 is 2015 and F2 is 2016, CF is operating cash flow Meredith Corporation (MDP) P/B Last Qtr. P/B 5-Yr High P/B 5-Yr Low ROE D/E Last Qtr. Div Yield Last Qtr. EV/EBITDA Industry Average S&P N/A 2.0 N/A Equity Research MDP Page 7

8 Earnings Surprise and Estimate Revision History Equity Research MDP Page 8

9 DISCLOSURES & DEFINITIONS The analysts contributing to this report do not hold any shares of MDP. The EPS and revenue forecasts are the Zacks Consensus estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the securities it covers. Outperform- Zacks expects that the subject company will outperform the broader U.S. equity market over the next six to twelve months. Neutral- Zacks expects that the company will perform in line with the broader U.S. equity market over the next six to twelve months. Underperform- Zacks expects the company will under perform the broader U.S. Equity market over the next six to twelve months. The current distribution of Zacks Ratings is as follows on the 1133 companies covered: Outperform %, Neutral %, Underperform 9.0%. Data is as of midnight on the business day immediately prior to this publication. Our recommendation for each stock is closely linked to the Zacks Rank, which results from a proprietary quantitative model using trends in earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. In determining Risk Level, we rely on a proprietary quantitative model that divides the entire universe of stocks into five groups, based on each stock s historical price volatility. The first group has stocks with the lowest values and are deemed Low Risk, while the 5 th group has the highest values and are designated High Risk. Designations of Below-Average Risk, Average Risk, and Above-Average Risk correspond to the second, third, and fourth groups of stocks, respectively. Equity Research MDP Page 9