By: Lisa Singhania, AP Business Writer
(AP) Signs that the advertising market may finally be thawing gave newspaper publishers reason for some optimism Wednesday. Most media companies, however, still offered conservative predictions that relied more on cost-cutting than ad revenue turnarounds for profits in 2003.
Amid continuing doubts about the strength and pace of the economic recovery as well as rising newsprint, health care, and pension costs, many publishers decided they were better off playing it safe on any projections until they know for sure that business is improving.
The comments came during two annual investment conferences on media, one held by Credit Suisse First Boston, the other by UBS Warburg.
The Dallas-based media conglomerate projected slightly higher fourth-quarter results than expected, reflecting improving advertising demand for television and newspaper products.
Belo, which owns The Dallas Morning News, The Providence (R.I.) Journal, two other newspapers, and 19 TV stations, now projects fourth-quarter earnings per share 2-3 cents higher than the 34-36 cents previously forecast. Newspaper revenue should be up in the mid-single digits from a year ago, compared with a 20% gain in TV revenue.
No specific numbers were released for 2003.
“As we look toward 2003, we expect the underlying advertising environment to remain solid for TV and to continue to improve for our newspapers,” said Dunia A. Shive, the company’s chief financial officer and executive vice president. But she cautioned that 2003 overall may be a difficult year, with TV stations facing difficult comparisons because of political advertising in late 2002.
Also, there are still questions about how soon and how much classified and employment advertising in newspapers will improve. Retail advertising appears to be improving.
Belo also said it is reducing the investment in Belo Interactive, its online business, to $7 million in 2003 from $11 million this year.
Dow Jones & Co.
Chief Operating Officer and Executive Vice President Richard Zannino said initiatives at The Wall Street Journal and other publications should position the company for greater growth, even as the advertising slump continues to limit profits.
Dow Jones, which also owns Barron’s and Ottaway Newspapers, offered no full-year numbers for 2002 and no forecast for 2003 but said fourth-quarter results should be better than expected. Fourth-quarter earnings per share before special items are now expected to be in the mid-20 cents per share range, about a dime above many analysts’ predictions, thanks to a spurt of technology advertising spending in November. Still, Zannino noted that advertising remains weak, particularly in the financial and technology categories.
“While we are pleased to see some incipient signs of life, we don’t yet see a sustained recovery,” he said.
What has helped Dow Jones this year are new efforts to attract more advertising, such as the new “Personal Journal” section, and cost-cutting measures.
“Already, ‘Personal Journal’ attracts more advertising at this point in its young life than did the highly successful ‘Weekend Journal’ at a similar point,” said Wall Street Journal Publisher Karen Elliott House.
Dow Jones has also reduced staff and expects to end 2002 with a headcount of 6,766 — about 16% below 2000 levels. Expenses in 2003 are expected to be below 1999 levels.
Journal Register Co.
Robert M. Jelenic, president and chief executive of the Trenton, N.J.-based publishing company, said results for the fourth quarter and the year should meet analysts’ expectations. The company expects earnings between 32 and 34 cents per share for the fourth quarter and between $1.12 and $1.15 for the year.
Chief Financial Officer and Executive Vice President Jean B. Clifton said she was hopeful that revenues for 2003 would continue to increase because of improving trends in advertising and circulation, as well as continued cost savings from the company’s new production plant. But she was also cautious.
“Understanding the economic outlook for 2003 is still uncertain … our current projections assume ad revenue will increase 3 to 4% this year,” she said. The company is also expecting a 1% to 2% increase in circulation revenues. Non-newsprint cash expenses, including insurance and pension costs, are expected to rise between 1.5% and 2%.
Journal Register Co. owns 23 daily newspapers, including the New Haven Register, Connecticut’s second-largest daily and Sunday newspaper, and 232 non-daily publications. It also operates 139 individual Web sites.
A combination of cost-cutting and improvements in advertising are anticipated to help meet current analyst forecasts for 2002 and 2003.
Chairman and CEO Tony Ridder said the company should satisfy the current earning consensus of $3.44 for 2002 and is comfortable with 2003 estimates of $3.84 earnings per share.
Steve Rossi, president of the newspaper division, said advertising revenue will be down about 2.5% in 2002 but should be better in 2003. Newspapers are seeing an upturn in retail, general, automotive, and real estate advertising — gains that should carry over to 2003.
“Our best guess is that overall ad revenue will be up about 4%,” he said.
Rossi also said daily and Sunday circulation is growing.
Additionally, Knight Ridder is focusing on keeping costs down and finding new ways to attract advertising. For example, the company’s San Jose, Detroit, and Philadelphia papers are offering more zoned publications, designed to provide more neighborhood-specific news and give smaller businesses an affordable way to advertise.
Also, Knight Ridder said its online business, Knight Ridder Digital, made money in October for the first time and expects to have a profitable fourth quarter. The division expects to be modestly profitable in 2003.
Knight Ridder is the nation’s second-largest newspaper publisher, with 32 daily newspapers.
Lee Enterprises Inc.
Lee executives said first-quarter earnings will fall below analysts’ forecasts, coming in at 49 to 51 cents per diluted share, compared with an estimate of 55 cents per share from a consensus of analysts surveyed by Thomson First Call.
But the company, which owns 44 daily newspapers in small- and mid-sized cities, termed the year that ended in September a major success. Lee’s April acquisition of Howard Publications is yielding returns earlier than expected, and advertising results in October, the first month of the new fiscal year, are promising, Lee executives said.
The company’s early optimism about the addition of the Howard business has fueled its interest in additional acquisitions of newspapers with daily circulation between 30,000 and 125,000.
“We’re keeping our eyes open for opportunities in that regard and hope to close some deals,” said Mary Junck, the company’s chairman and CEO.
Chief Financial Officer Carl Schmidt said results for January-September 2003 would hinge on continued revenue growth from advertising and other sources and the price of newsprint.
He said the company will begin expensing employee stock options in 2003, reducing earnings by 5 to 7 cents per share for the year.
Chairman and CEO Gary Pruitt said strong revenue in November prompted the Sacramento, Calif.-based publisher to raise its earnings forecast for the fourth quarter to 79 to 81 cents a share, beating expectations of 78 cents.
In 2003, Pruitt expects advertising revenues to grow in the “low to mid-single-digit range” on solid employment and retail advertising. Total revenue growth is expected to be tempered by higher projected newsprint prices and rising health care and retirement costs.
In November, the publisher of the Minneapolis Star Tribune and The Sacramento Bee saw a 2.2% gain in revenue from the same month a year ago, and a 2.1% rise in ad revenue.
Pruitt said the November performance means the company is likely to turn in full-year earnings of $2.79-$2.81 a share, ahead of the $2.78 a share analysts expected.
Chief Financial Officer Patrick Talamantes said the company now feels the “wind at its back” as advertising begins its comeback.
Media General Inc.
The Richmond, Va.-based media company sees some improvements in advertising revenues, but still a challenging environment.
Media General Chief Financial Officer Marshall N. Morton said fourth-quarter earnings per share are expected to be in the 85- to 87-cent range, ahead of the 81 cents forecast by Thomson First Call. But broadcast revenues remain the primary driver, increasing 25% during the period primarily because of political ads, while publishing revenues will be up about 1% from a year ago.
Lower newsprint costs also helped this year, as did cost-cutting measures put in place in 2001.
Earnings per share for 2003 are expected to be about $2.40, well below the $2.73 consensus of analysts surveyed by Thomson First Call.
Publishing revenues are expected to increase 4% to 6%, but costs will likely be higher and operating profit lower. Besides salary and benefit increases, the company is projecting increases in retirement and health care expenditures and possibly higher newsprint costs.
The company aims to boost overall circulation in 2003 by 2% to 2.5%.
“Through October, 15 of our 25 papers had daily circulation gains and 16 had Sunday gains,” said Reid Ashe, Media General’s president and chief operating officer.
The New York Times Co.
A New York Times-branded TV channel will be launched in early 2003 in partnership with Discovery Communications. The Discovery Civilization channel, a digital cable offering, will be renamed the Discovery Times channel as part of a deal that gives the Times Co. 50% ownership.
Discovery Communications will also pay the Times for at least $40 million worth of programming over the next five years.
“We’re continuing to expand our portfolio of multiple properties aimed at capturing the lucrative, advertiser-attractive knowledge audience,” CEO Russell T. Lewis said, referring to the appeal the company believes its brand name will have with affluent, educated consumers.
Advertising trends also appear to be improving. The company said its November advertising revenue increased 6.7% from a year ago, reflecting an upturn in technology, entertainment, transportation, and other advertising.
The company also said earnings for 2002 should fall somewhere within its previous forecast of $1.90-$2.00. For 2003, improved advertising trends along with cost-cutting are projected to put the company’s earnings-per-share growth rate in the mid-single digits to low-double digits.
The New York Times Co. publishes The New York Times, The Boston Globe, and 16 other newspapers. It also owns TV stations, radio stations, and more than 40 Web sites.
The publisher of the St. Louis Post-Dispatch, Arizona Daily Star, and numerous other publications and Web sites predicted earnings per share would grow at least 10% in 2003 as the economy begins to recover and cost-cutting measures reduce spending.
The company expects 2003 advertising and total revenue growth to increase between 4% and 5.5% if employment and auto ads are stable. For 2002, Pulitzer said it expects total earnings per share to be $1.75 to $1.80, in line with Thomson First Call estimates.
Newsprint costs are expected to rise 5% to 10% next year. But the company said other cost-cutting measures and controls should keep the increase in non-newsprint costs, such as labor, below 3%. As a result, operating cash flow margins should increase by 1% to 2% in 2003.
Capital expenditures will decrease in 2003, falling to $12 million-$14 million, from $25 million-$27 million in 2002.
Also, the company moves in January to a self-insured health plan expected to reduce costs.
The company is banking on RedEye, a new Chicago tabloid aimed at people 18 to 34 years old, to attract new readers.
“We’re really pleased with initial indications on RedEye. Advertising demand is ahead of where we thought it would be, reader demand is where we thought it would be,” said Tribune President and Chief Operating Officer Dennis FitzSimons.
FitzSimons becomes chief executive of the company on Jan. 1, replacing John W. Madigan. Madigan will remain board chairman until he retires at the end of 2003.
The company expects a strong finish to 2002 after seeing revenues climb in November and early December. In a four-week period that ended Nov. 24, the Tribune reported revenues jumped 7% to $446 million this year.
The company also said it is comfortable with analysts’ consensus earnings estimate of 54 cents for the fourth quarter and $1.84 for all of 2002. In 2003, earnings per share are expected to increase in the low-double-digit range, in line with current analyst forecasts. Margins in both the publishing and television groups are also expected to continue to improve.
Tribune owns the Chicago Tribune and Los Angeles Times, 10 other daily newspapers, 24 television stations, and the Chicago Cubs baseball team.