Dow Jones Reports Higher 1Q Earnings

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By: Seth Sutel, AP Business Writer

(AP) Dow Jones & Co., publisher of The Wall Street Journal, reported higher first-quarter earnings Thursday because of an asset sale and cautioned that second-quarter profits would be lower than Wall Street estimates due to a continued slump in advertising.

First quarter net earnings jumped to $129.8 million or $1.53 per share compared with $6.2 million or 7 cents per share in the same three-month period a year ago. The most recent period included a one-time gain from the sale of four community newspapers from its Ottaway group.

Excluding the profit from the sale and other one-time effects in both periods, Dow Jones’ earnings fell by half from the same quarter a year ago, to $6.9 million versus $14.7 million due to continued declines in advertising.

Per-share earnings were 8 cents, a penny below what analysts polled by Thomson Financial/First Call were expecting, versus 17 cents a year ago.

Dow Jones also issued a cautious outlook for its second quarter, saying that earnings per share would be between 20 cents and 30 cents, well below current estimates from Thomson Financial/First Call of 45 cents per share, and also below the 52 cents per share the company earned in the same period a year ago.

Dow Jones had not previously issued guidance for its second quarter, and the pre-announcement took analysts and investors by surprise. The company’s shares were off $1.99, or 3.3%, to $57.95 in afternoon trading Thursday on the New York Stock Exchange.

“I’m not surprised they lowered the number, though it’s lower than I thought it would be,” said Edward Atorino, a publishing analyst at Wasserstein Perella. “It reflects the problems they have in two big categories, technology and financial advertising, and there hasn’t been much of a recovery there.”

Advertising linage at The Wall Street Journal fell 25% on a per-issue basis in the first quarter, but executives said that the rate of decline was slowing. They now expect linage to decline between 10% and 20% in the second quarter.

“We are seeing some glimmers of an incipient recovery,” Richard Zannino, chief financial officer of Dow Jones, told investors on a conference call. Still, he said the company’s outlook was “tempered” by the difficult economic climate.

Zannino said the recovery so far in 2002 had been slower than the company had expected, but he added that Dow Jones still expects more improvement in the second half of the year. He said the company expects full-year advertising linage to decline in the mid-single digits from last year and full-year revenues to decline by a similar amount.

The company is spending about $20 million to market the new design of the Journal, which made its debut on Tuesday. Peter Kann, publisher of the newspaper and also the chief executive of Dow Jones, said he expected the new design to draw in additional advertising over time.

Revenues fell 15% in the first quarter to $392.9 million compared with $459.9 million. By segment, Dow Jones reported that revenues from print publishing fell 21% in the first quarter to $236.1 million.

Separately, Dow Jones also announced Thursday that its Ottaway community newspaper group had reached an agreement to sell its Essex County Newspapers to Eagle-Tribune Publishing Co. for about $70 million in cash.

The newspapers included in the transaction are The Salem Evening News, The Gloucester Daily Times, and the Newburyport Daily News, all in Massachusetts. After the sale, Ottaway will continue to publish 12 daily and more than 17 weekly newspapers in 10 states.

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