Merrill Lynch Upgrades Dow Jones

By: E&P Staff

Merrill Lynch raised its rating on Dow Jones from “sell” to “neutral” calling the company’s move to contain costs and decision to add front page advertising “nothing short of stunning.”

“We had underestimated management’s determination to produce results,” wrote Merrill Lynch analyst Lauren Rich Fine in a note released on Friday.

The research firm anticipates that Dow Jones can reap an additional $19 million in ad revenues ($0.11 per share) if the company gets about $60,000 per front page ad at 310 days a year at an 85% margin.

That, on top of about $9 million in savings — management said they are trimming administrative and technology costs — caused Merrill Lynch to revise its rating since Dow Jones is trading higher (9 times 2007 EBITDA) versus its peers (7.5 times 2007 EBITDA).

“[The] Wall Street Journal is clearly taking share in an uneven, tepid ad environmnent,” Merrill Lynch said.

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