Goldman Sachs Warns of Weak Q1 Results

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By: Jennifer Saba

As newspaper companies get ready to release Q1 results, Goldman Sachs warns investors it’s going to be more of the same. The trends “will likely provide little reason for cheer among newspaper publishers and investors,” wrote Goldman Sachs analyst Peter Appert in a research note on the industry.

Appert and his team forecast that Q1 advertising revenue will decline about 10%. It will be “nearly impossible” for the cost cutting done by several companies to make up for the drop in revenue.

February ad revenue dropped about 9.8% year-over-year, while in January it fell 11.4%. March will most likely return high single-digit declines in advertising revenue too, according to the note.

On top of that, newsprint prices should rise about 12% this year to $665 per ton, forecasts Goldman Sachs.

The weak advertising results point to “strong evidence” that the economy is in a recession and the pressure on newspaper earnings will likely intensify throughout the year, Appert wrote.

In his view, the steady downward trend on earnings estimate revisions is the “most important single driver of newspaper stock underperformance.” Goldman Sachs anticipates that in Q1, EPS will decrease 26%.

While stocks are nearing the low-end of historical valuations, the research firm suggests to stay away maintaining its underweight stance on the sector.

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