Earnings Cheat Sheet: New Look Knicks Help Bolster Profits At Madison Square Garden (MSG)

Madison Square Garden Inc. (NASDAQ: MSG) was spun off by Cablevision (NYSE: CVC) this past February in an effort to separate CVC’s profitable cable services from the more volatile entertainment holdings of MSG.  Since going public, MSG has swung to back-to-back quarterly profits, beating estimates both times.

Earnings: 3Q profits of $19.3 million ($0.25/share) vs. $10.1 million ($0.14/share) in 3Q09.

Revenue: Up 18% YoY to $190.8 million.

Actual vs. Wall St. Expectations: MSG beat big on EPS as analysts were expecting just $0.15/share.  With expectations of $176 million in revenue, the company came in ahead of the Street on both ends.

Notable Stats: Revenue out of MSG media, which is the company’s largest segment, rose 18% YoY primarily on higher contract fees from affiliates.  Ad revenue was up $1.1 million.

MSG’s entertainment segment, which produces live productions, saw a 25% YoY increase in revenue.

Revenue out of the company’s sports business rose 6% YoY.

Did You Hear That? CEO Hank Ratner noted that, “Madison Square Garden continues to perform well on multiple fronts, with our strong third quarter results reflecting our continued operating momentum.  We have more than doubled our adjusted operating cash flow over the first three quarters of 2010 and have grown our cash balance to over $325 million while continuing to fund the Arena Transformation project.”

Technicals: Friday’s post-earnings pop has MSG looking like it’s about to challenge recent highs.  Shares are trading above their 20-, 50- and 200-day moving averages and gapped up on high volume following the quarterly report.  Having closed at $22.18, look for shares to challenge highs in the $22.56-$22.71 range.  A breakout above that range would imply the potential for a new leg higher.

Commentary: MSG is an interesting way to play the recovering economy.  While media is the company’s largest segment (MSG network & FUSE network), MSG generates a significant portion of its revenue from shows, musicals and sporting events.  With Wall St. compensation back at all time highs and the consumer feeling generally more confident than they did a year ago, MSG definitely has the potential to produce a strong holiday season and might be worth a place in your portfolio.

Disclosure: No holdings in MSG.