After The Bell With Fitz & Jen: Newspaper Stock Mini-Rally Ends Friday

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By: Mark Fitzgerald and Jennifer Saba

The rally that sent most newspaper stocks up through the week petered out Friday under the weight of continuing skepticism by analysts, ratings firms and, finally, investors that the industry’s woeful credit position is turning around.

10 of the 12 publicly traded newspaper companies that E&P follows in the New York Stock Exchange (NYSE) declined on the day, and most percentage losses exceeded the Dow Jones Industrial Average, which with a 0.1% decline to 12,609 points was essentially flat.

On Friday, more analysts lowered their estimates on quarterly advertising revenue, just weeks before companies are expected to report Q1 results.

Wachovia Equity Research bumped down its Q2 forecast on the companies its covers from a decline of 6.3% to a decline of 7.4%. For the year, the research firm slashed ad revenue estimates from a drop of 6.7% to a drop of 7.4%.

Bear Stearns analyst Alexia Quadrani wrote in her weekly update about a recent meeting with Tribune’s Sam Zell. While she noted that not much new ground was covered, she did express surprise at two things: all the interested parties in Newsday “given the challenging environment and relatively unappealing longer-term outlook for the industry,” and the amount of “organizational fat” at Tribune.

On the subject of Tribune’s corporate tubbiness, Quadrani wrote: “This suggests to us that there is still a significant amount of costs that can be taken out of this business, and possibly the businesses of Tribune’s peers.”

Dear God, not more cuts! Could it be? Are Tribune and other newspaper companies really that overweight?

I should also point out that Wachovia’s John Janedis was most down on four companies which faced the “greatest estimate revenue changes”: The New York Times Co., GateHouse Media, Lee Enterprises, and McClatchy. Surprise, surprise — all pure-play newspapers companies. The only reason Journal Register doesn’t make that list, is, because, perhaps, maybe there’s hardly anything left to “lower”?

Ironically, Journal Register (NYSE: JRC) strengthened for the third consecutive day in the midst of the sector swoon. Journal Register closed at 55 cents, up 3 cents, or 5.77%

All four companies Janedis mentioned ended on the downside Friday.

GateHouse Media Inc. (NYSE: GHS) closed at $5.90, down 14 cents, or 2.32%. The McClatchy Co. (NYSE: MNI) ended the day at $10.65, down 28 cents, or 2.56%. Lee Enterprises Inc. (NYSE: LEE) closed at $10.66, down 52 cents, or 4.65%. The New York Times Co. (NYSE: NYT) ended trading at $19.27, down 73 cents, or 3.65%.

In other analysts news Friday, Lehman Brother’s Craig Huber forecasted that ad revenue will fall through 2008 by about 9% — and that there will be no 2009 rebound. Instead, next year?s revenue will go down 6%, he predicted as he kept his negative rating on the sector.

Analyst Edward Atorino was only slightly more optimistic, figuring ad revenue will drop 7.3% this year.

The drip-drip-drip of bad news over the week had to wear down stocks eventually, and it’s probably remarkable that the sector is even capable of staging a rally given Wall Street’s deep disenchantment with the newspaper business these days.

Dallas-based American Community Newspapers (AMEX: ANE) announced that its CFO Daniel J. Wilson had resigned from his position to pursue other opportunities.

The news attracted little investor attention — just 500 shares (AMEX:AME) traded hands. It closed at 75 cents, up 5 cents, or 7.1%.

Here’s how the Street treated the rest of the newspaper sector Friday:

A.H. Belo (NYSE: AHC) closed at $11.02, down 8 cents, or 0.72%

E.W. Scripps (NYSE: SSP) unchanged at $42.90

Gannett Co. Inc. (NYSE: GCI) closed at $29.48, down 79 cents, or 2.61%

Journal Communications Inc. (NYSE: JRN) closed at $7.42, down 6 cents, or 0.8%

Media General Inc. (NYSE: MEG), closed at $15.12, down 16 cents, or 1.05%

Sun-Times Media Group (NYSE: SVN) closed at 74 cents, down 6 cents, or 7.5%

Washington Post Company (NYSE: WPO) closed at $680.02, up $12.02, or 1.8%

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