Newspaper Shares Near Valuation Floor: Analyst
Forbes ^ | August 22, 2006 | R.M. Schneiderman
forbes.com
Newspapers stocks are near the valuation floor, but the Internet isn't likely to contribute to their growth for up to 18 months, according to a Tuesday report by Credit Suisse.
The report follows news that July advertising number for the industry declined 2.1% from a slightly positive 0.5% growth in June.
"July newspaper performance not only marks the weakest month of the year, but was also softer than April, which was hurt by the Easter shift," said Debra Schwartz, an analyst for Credit Suisse.
"With few exceptions, the companies will need a strong September to meet newspaper guidance for the quarter."
If September proves to be a lackluster month, more cost saving measures could be on the way, Schwartz said.
"In the second quarter, cost control helped eight of the companies to meet or beat the consensus," she said.
Eventually, however, Schwartz said that the Internet should become a viable platform for growth starting in the next 18 to 24 months.
"We continue to believe the longer term viability of the newspapers partially hinges on their ability to monetize the Internet," she said.
In July, Tribune and McClatchy received greater than 7% of their revenues from the net, while New York Times received an 8% contribution and the Washington Post a 10% contribution.
That's close to the 10% to 15% online revenue contributions newspaper companies will need to offset the print declines, said Credit Suisse.
For now, however, Schwartz said investors should hold off. Yet she did recommend Dow Jones and Scripps due to their reputation for higher growth, adding that Tribune offers "a significant upside."
Newspaper stocks are down 11% year to date and down 4% since July, according to Credit Suisse.
In morning trading, shares of EW Scripps, The New York Times Company and McClatchy were down slightly, while Tribune and Dow Jones saw modest gains. |
