Earnings Preview: New York Times

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Newspaper publisher New York Times Co. reports earnings for the first quarter on Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: In March, the New York Times defused a standoff with its biggest outside shareholder, Harbinger Capital, by agreeing to support two of the hedge fund’s nominees for the company’s board of directors. Shareholders are scheduled to vote at the publisher’s annual meeting this month.

Harbinger had accumulated a 19 percent stake in New York Times, rivaling the stake held by the Sulzberger family. The Sulzbergers still control the New York Times through a special class of shares which allow them to name 70 percent of the board members.

The company plans to expand its board from 13 members to 15 to accommodate the new nominees.

New York Times, whose properties include The Boston Globe, International Herald Tribune and its namesake daily, said its February revenue from continuing operations dipped 2.6 percent on continued weakness in classified advertising. Total advertising sales dropped 6.6 percent to $148.2 million, while circulation revenue rose 2.4 percent to $70.1 million.

New York Times is just one company of many in the sector that continues to struggle with declining ad revenue as consumers shift their focus to the Internet. Newspaper publishers are responding by cutting costs and ramping up Web operations.

The company also announced in February that it planned to eliminate 100 news jobs through attrition, buyouts and, if necessary, layoffs.

BY THE NUMBERS: Analysts surveyed by Thomson Financial expect first-quarter earnings of 14 cents per share on revenue of $752.4 million.

ANALYST TAKE: Lehman Brothers analyst Craig Huber sees increased newsprint prices for the sector, with the average 2008 price estimated to climb 6.2 percent, compared with a prior forecast for an increase of 3.3 percent.

In a March 31 client note, the analyst said Wall Street’s estimates for New York Times and its peers are too high. He predicts a quarterly profit of 10 cents per share.

In an overview of the sector earlier this month, Goldman Sachs analyst Peter Appert said the group will likely see a median first-quarter earnings-per-share decline of approximately 26 percent as ad revenue continues to fall.

John Janedis of Wachovia Capital Markets LLC anticipates first-quarter net income of 13 cents per share, saying in a March 18 client note that the New York Times’ February revenue results were a bit better than expected.

STOCK PERFORMANCE: Shares of New York Times climbed 8 percent during the quarter. They finished Monday’s trading at $19.06.

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