Q3 Ad Revenue Results Expected to Be the Worst in Two Years

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By: Jennifer Saba

Third quarter ad revenues are estimated to advance a scant 1.7% — the industry’s weakest performance in two years, according to Goldman Sachs. This is after a 2.8% rise in ad revenues for the first half of the year.

The research firm maintains its cautious view on the sector, a stance that will unlikely change in the near-term as the ad environment remains soft. Retail advertising, for example, took a nosedive in late summer. July/August revenues barely grew at 0.5%, a “dramatic deceleration from the pace of the prior 18 months,” said the note. National is also weak.

The only lifesaver is the classified category, which continues to advance at a 3% to 4% rate.

The note also addressed the cuts announced by Knight Ridder and The New York Times Co., calling them “noteworthy” because the reductions include editorial positions. “We interpret this change as an indication that both companies anticipate long-term pressure on revenue growth dynamics.”

Goldman has been busy trimming the estimates of Gannett, Knight Ridder, McClatchy, The New York Times Co., and Tribune. The research firm only recommends E.W. Scripps, which garners an “outperform” rating due mostly to growth in its cable division.

Over the last four weeks, newspaper stocks are down 4.7% compared with a 0.8% gain in the S&P500. Year-to-date, the group is down 13% compared with a 0.3% increase in the S&P500.

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