Merrill Lynch on Mid-Year Media Review: Investors Unmoved

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By: Jennifer Saba

Those investors looking for a spark of inspiration at this week’s Mid-Year Media Review have likely walked away “unmoved” said Merrill Lynch in a note issued today.

Though hardly waving the surrender flag, many executives acknowledged challenges but remained upbeat about the second half of the year. Merrill Lynch however, doesn’t quite buy it.

“Several companies noted that they expected better second half newspaper ad revenue growth, but we are not as confident,” the note said. The firm was also “struck” that there was very little guidance in forecasts and that earnings per share estimates were rarely mentioned.

Though a year has passed since the Tribune Co. first announced circulation problems at Newsday and Hoy, the effect still impacts the industry. Merrill thinks that part of the decline is ?knee jerk overreaction? to last year’s scandals, but the firm was surprised to learn ?that telemarketing still produces over 45% of Knight Ridder’s circulation starts.?

Advertising growth remains all over the map; help wanted and real estate is expected to increase while national and retail remains mixed. Online was the true champ as many companies reported big jumps in revenue. But it also suggests a migration from print to online, said Merrill Lynch, “a trend we suspect is unstoppable.”

Growth is occurring in new products like free dailies, shoppers, etc. While applauding the industry for trying something different, the research firm thinks that new products and online carried the first half of the year: ?Given the muted overall industry growth, we can’t help wonder how bad it would have been this year without new products.?

Though investors may walk away indifferent, Merrill noted that Lee and McClatchy both gave upbeat presentations suggesting there’s still some kick in the industry. ?Lee management’s enthusiasm is particularly infectious? McClatchy has always been the most innovative in the industry (though Knight Ridder may be closing the gap).?

The newspaper group rose 1.3% this week, outpacing the S&P, which advanced 0.6%. Merrill Lynch maintains a ?neutral? rating on the sector.

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