Gannett, Tribune downgraded (Dinosaur Media Extinction Alert)

Marketwatch.com ^ | June 2, 2006 | David B. Wilkerson

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Also, Web-based newspaper ad spending jumps 35%

By David B. Wilkerson, MarketWatch Last Update: 4:22 PM ET Jun 2, 2006

CHICAGO (MarketWatch) -- Ratings for newspaper publishers Gannett Co. and Tribune Co. were cut Friday to equal weight from overweight by Morgan Stanley analyst Lisa Monaco, who said she doesn't see anything in the near term that could lift the stocks' value.

Monaco also lowered her advertising-revenue forecasts for the newspaper industry in reaction to what she called "greater than previously expected secular pressures from the Internet," as well as the adverse effects of consolidation among advertisers.

She now sees newspaper ad revenue rising 2.1% in 2006 from 2005, compared with her previous estimate of 2.8%. Monaco then anticipates increases of 2.7% in both 2007 and 2008.

At Gannett, (GCI) the analyst said, results will probably continue to be hurt by "weakness in the United Kingdom and volatility at USA Today."

In the first quarter, USA Today's ad revenue fell 4.2% as paid ad pages fell to 1,020 from 1,101 in the year-earlier quarter.

Monaco says that Tribune (TRB) is troubled by "ongoing ad-revenue softness" at the Los Angeles Times -- which represents about a quarter of the company's publishing revenue -- and its recovery from a circulation overstatement scandal at Newsday.

Weakness in movie-studio ads has hurt the Times, which was the centerpiece of Tribune's $8 billion acquisition of Times-Mirror Co. in 2000.

Tribune said earlier this week that it would buy back as many as 75 million of its common shares, and that it expects to sell at least $500 million in certain noncore broadcasting and publishing assets outside its top three markets. See full story.

While the market reacted well to the move, Monaco said Friday that its benefits are likely to already have been priced into the stock.

Gannett shares fell 37 cents to close at $54.31, while Tribune rose 12 cents to $29.94.

"Our base cases for both Gannett and Tribune assume that newspapers continue to lose readers and therefore advertising share to the Internet," Monaco told clients. Although "under this scenario, we do assume that the newspapers are able to stem some of their share losses by gaining traction with advertisers and readers with their own online offerings."

Spending on the Web

Separately on Friday, the Newspaper Association of America said advertising spending on newspaper Web sites in the first quarter rose 35% from the year-earlier quarter, to $613 million.

Spending on print and online ads combined totaled $11.1 billion, a 1.8% increase from a year earlier.

Within the print category, classified advertising rose 4.7% to $3.8 billion. Retail slipped 1% to $4.8 billion, while national fell 4.8% to $1.7 billion.

Among classified print ads, real estate and help-wanteds continued to be strong categories for newspapers. Real estate rose 26% to $1.1 billion, while help-wanteds rose 2.4% to $1.1 billion. Automotive ad spending continued to be weak, dropping 15% to $940 million.

Summarizing the results, NAA President John Sturm said in a statement that newspaper publishers are "winning" in their efforts to generate online users and monetize their Web-based investments.

"Newspaper print advertising continues to hold its own in the face of overall ad softness, reflecting our industry's ongoing dialogue with the advertising community to demonstrate the enduring value of newspapers' reach and engagement with consumer audiences," he added.

Zerhusen: Newspaper stocks 'amazingly cheap'

Among Wall Street's newspaper bulls is Thyra Zerhusen, manager of the Chicago-based ABN Amro Mid-Cap Fund, who says that a number of newspaper stocks are undervalued. More newspaper publishers should be pursuing share buybacks, along with dividend increases, according to Zerhusen. As long as the companies "don't make silly acquisitions," they still generate a lot of cash, she said.

The newspaper firms have to do a better job of explaining how quickly online ad revenue is growing, for the benefit of both shareholders and advertisers, Zerhusen added. In the first quarter of 2006, New York Times Co.'s (NYT) Internet businesses, including the Web sites of its newspapers and television stations, its digital archives and About.com, represented about 7.5% of the company's revenues, compared with 4.5% in the same quarter a year ago.

"So if that goes from 7.5% to 14%, people will start to say 'Hey, this is becoming critical mass,'" the fund manager said. "That will change the opinion of investors."

Zerhusen is also encouraged by a statistic issued by Nielsen/Net Ratings last month. The research firm said that newspaper Web sites averaged 56 million users during the first quarter -- or 37% of all online users during that period. Further, among nearly 112 million people who went to news and information sites in the March quarter, 58% visited an online newspaper.

"I think that is very interesting. So stocks like New York Times, Washington Post Co. (WPO) , Gannett and Tribune ... really do look amazingly cheap to me. There is a misperception in the marketplace, and I think that's going to change."

One advantage newspaper publishers have as long-established businesses, Zerhusen commented, is that they typically pay dividends, unlike their online competitors.

Gannett's quarterly dividend is 29 cents a share; Tribune's is 18 cents, and Dow Jones & Co. (DJ) , parent of MarketWatch, pays a 25-cent dividend.

End of Story

David B. Wilkerson is a reporter for MarketWatch in Chicago.

[abb]

Sunday afternoon Good News...

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Pinging with Good News for Sunday Afternoon...

[GeronL]

Think they will try to get rid of their bias and add balance to their opinion pages??

me either

[gcruse]

Monaco also lowered her advertising-revenue forecasts for the newspaper industry in reaction to what she called "greater than previously expected secular pressures from the Internet,"

sec·u·lar
adj.

1. Worldly rather than spiritual.
2. Not specifically relating to religion or to a religious body: secular music.
3. Relating to or advocating secularism.
4. Not bound by monastic restrictions, especially not belonging to a religious order. Used of the clergy.
5. Occurring or observed once in an age or century.
6. Lasting from century to century.

WTF?

[abb]

Monaco also lowered her advertising-revenue forecasts for the newspaper industry in reaction to what she called "greater than previously expected secular pressures from the Internet,"

Perhaps her way of saying that the changes are likely to be long term...

[Tribune7]

I think it has to do with our colleges and high schools no longer teaching that words actually have meanings so if it sounds good use it.

[ozzymandus]

The dinosaurs are sinking deeper and deeper into the tarpits.

[conservatism_IS_compassion]

Worldly rather than spiritual.

You didn't know that, by the lights of journalists, journalism's materialism is "spiritual" and conservatism's practicality is worldly?

[Dilbert56]

Circular? Circulation-related?

[Mo1]

And yet ... they still can't find a clue

[Grampa Dave]

"Zerhusen: Newspaper stocks 'amazingly cheap'

Among Wall Street's newspaper bulls is Thyra Zerhusen, manager of the Chicago-based ABN Amro Mid-Cap Fund, who says that a number of newspaper stocks are undervalued. More newspaper publishers should be pursuing share buybacks, along with dividend increases, according to Zerhusen. As long as the companies "don't make silly acquisitions," they still generate a lot of cash, she said."

Anyone who owns a mutual fund managed by this babe or ABN might want to sell it tomorrow.

Who cares if these Dinosaur Fishwraps generate a lot of cash when what you paid for the stock is dropping like a hot chef's knife through a pound of butter. It would be interesting to see what political party/candidates she and the fund contribute to.

So Thyra, who is getting all of this great generated cash? It ain't average mutual fund owner of your fund.

[Navy Patriot]

Think they will try to get rid of their bias and add balance to their opinion pages??

Too late.

[Doctor Raoul]

Perhaps the word the wanted was "circulation" and the spell check inserted "secular"?

[Navy Patriot]

More newspaper publishers should be pursuing share buybacks

So, ideally the stockholders could sell for something and when they fold the pubs could take the entire hit. Maybe there is a silver lining.

[Doctor Raoul]

Raoul's First Law of Journalism
BIAS = LAYOFFS

[COEXERJ145]

[Uncle Vlad]

Perhaps the Tribune organization will finally sell the Chicago Cubs to a serious owner who will be committed to putting a winner on the field.

[bray]

Looks like a good time to go Short on Fishwrap stocks and make a killing.

Pray for W and Our Troops

[Grampa Dave]

Her fund is ABMIX and it has been out for a little over a year. Its performance for the last year is a very poor 83% in its category, which means 82% of the Mid Cap Value funds have outperformed it.

The fund, also, owns even more Readers Digest, RDA, than NY Slimes stock. Below is a chart showing how these two terrible investments have done versus the Mid Cap Index ETF, MDY.

[Grampa Dave]

You may be right, my friend.

[Grampa Dave]

"So, ideally the stockholders could sell for something and when they fold the pubs could take the entire hit. Maybe there is a silver lining."


So far the TRB buyback program was limited to fixed number of shares. One gets the feeling that by the time the average shareholder responds, the buy back will probably be over.

If one can participate in one of these buy back programs, they might want to sell their shares, take the money and run.

[Milhous]

Excellent ABN Amro Mid-Cap Fund analysis Dave. :)

Dinosaur Fishwraps generate a lot of cash

Fishwraps apparently immediately spend all of their cash acquiring worthless Goodwill and Intangible assets, both of which provide a perfect place to park expense that otherwise might damage the bottom line.

[Grampa Dave]

Thanks for your kind words.

This is a great assessment of the fishwraps by you: "Fishwraps apparently immediately spend all of their cash acquiring worthless Goodwill and Intangible assets, both of which provide a perfect place to park expense that otherwise might damage the bottom line."

[devolve]

[potlatch]

Looks great!! A whole new concept in imagery, lol.

[george76]

Monaco also lowered her advertising-revenue forecasts for the newspaper industry in reaction to what she called "greater than previously expected secular pressures from the Internet," as well as the adverse effects of consolidation among advertisers...

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They need to lower their revenue forescasts some more.

[samadams2000]

The only industry that insults and lies to its customer base daily.