Earnings Reports Show Revenue Revving Up

By: Lucia Moses

While the recovery may not be coming as fast and strong as publishers would like, the latest round of earnings reports from publicly traded newspaper companies show things are moving in the right direction.

And looking at overall advertising trends, CEOs have little to complain about. Industrywide, year-over-year ad-revenue declines are shrinking with each passing month. On the expense side, lower interest rates, lower newsprint prices, and cost controls are helping to make up for what is missing in ad revenue.

“Certainly, the sun is shining brighter,” said Kevin Gruneich, Bear, Stearns & Co. Inc.’s newspaper analyst.

During conference calls with investors and analysts last week, however, newspaper executives often spoke guardedly about the advertising outlook, predicting a mild rather than robust recovery.

The typically conservative Douglas H. McCorkindale, chairman, CEO, and president of Gannett Co. Inc., said: “We will continue to run this business as if we remain in a recession. … On the print side, it’s just cautious, slow movement.” Gannett earnings per share (EPS) rose 7%, to 91 cents, in the first quarter, with lower interest expense offsetting a 5% decline in newspaper ad revenue, to $969.8 million.

Similarly, the Tribune Co.’s first-quarter publishing revenue declined 6%, to $932 million. Some ad categories grew, but earnings were hurt by charges related to publishing-staff cuts and a decline in the value of its former Times Mirror Co. papers. Tribune posted an EPS loss of 33 cents versus 20 cents a year earlier. Tribune said, however, that classified revenue was up in the first two weeks of April and that it expected to hit the high end of analysts’ estimates for the second quarter and full year.

Positive news also came from the McClatchy Co., which had better-than-expected EPS of 51 cents versus 39 cents a year ago. Its second-quarter earnings estimate also surpassed Wall Street’s expectations. For the first quarter, newspaper ad revenue declined 4.3%, to $202.2 million, with the retail segment up slightly.

At Media General Inc., publishing revenue was off 5.9%, to $128.9 million, although retail trends were improving. “Many advertisers remain cautious about the size of the schedules they’re buying,” said Chief Financial Officer Marshall N. Morton. Despite improvements in TV revenue, the company recorded a loss of $5.47 a share because of a one-time charge reflecting a decline in the value of recently acquired TV properties.

The Journal Register Co. reported same-store ad revenue declined 6.3% to $62.5 million. Not counting a gain on the sale of newspapers last year, EPS was flat at 22 cents.

“Small companies are clearly doing better,” said Edward J. Atorino, who follows the industry for Dresdner Kleinwort Wasserstein, adding that “when the economy picks up, I think the big companies will move past the little guys.”

That day hasn’t arrived, yet. At the Washington Post Co., pallid results at the flagship, where ad revenue declined 14%, to $131.5 million, continued to hold back earnings. First-quarter EPS totaled $2.44 versus $20.90 a year ago, reflecting a gain in 2001 from the sale and exchange of cable systems.

The New York Times Co., meanwhile, reported its newspaper ad revenue declined 11.2%, to $448.7 million. First-quarter EPS of 39 cents versus 43 cents a year earlier nevertheless beat estimates, thanks partly to circulation growth and price increases at the flagship. Executives said they were confident about a second-half recovery, however, based on advance bookings by national advertisers. “Clearly, the trend is in the right direction,” with spending picking up in such categories as media, advocacy, and entertainment, Chief Financial Officer Leonard Forman said.

Help-wanted classified advertising remains the industry’s biggest weakness as papers continue to struggle against comparisons with the recent boom years. Said Media General Chairman and CEO J. Stewart Bryan III, “I don’t ever anticipate classified coming back to the glory days of ’98, ’99, and 2000.”

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