Sector Snap: Newspaper Publishers Slide

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Shares of newspaper publishers slid Friday afternoon as analysts took an increasingly bearish view of the troubled sector and forecast steep advertising drops.

Overall print ad revenue fell 9.4 percent in 2007, according to data posted on the Newspaper Association of America’s Web site last week. While online ad revenue jumped more than 18 percent in the same period, at $3.2 million it is a fraction of the $42.2 million from print sales.

The group has continued to experience declining ad sales as consumers and advertisers migrate to the Internet. Newspaper publishers have tried to combat the issue by reducing costs and ramping up Web efforts.

Lehman Brothers analyst Craig Huber kept a “Negative” rating on the sector and predicted ad revenue will fall 9 percent in 2008 and 6 percent in 2009. Wall Street’s valuation and estimates on the sector are too high, and shares of newspaper publishers are down 18.3 percent year to date, compared with a 6.7 percent drop in the S&P 500, Huber said.

Benchmark Co. analyst Edward Atorino said he expects newspapers to post a first-quarter earnings drop. Shares may have bottomed recently, but Atorino said he remains cautious on the sector and expects ad revenue to drop 7.3 percent in 2008.

“Earnings are expected to remain under pressure throughout 2008, though newspaper ad comparisons are expected to ease somewhat later in the year and growth in revenues from online and new initiatives could bolster total revenue,” he said in a client note.

In intraday trading, shares of New York Times Co. lost 83 cents, or 4.2 percent, to $19.17, while shares of USA Today publisher Gannett Co. Inc. slipped 82 cents, or 2.7 percent, to $29.45.

Elsewhere in the sector, shares of E.W. Scripps Co. fell 20 cents to $42.70. The Cincinnati-based company publishes 18 newspapers and owns the Food Network, among other properties.

Shares of Wall Street Journal-publisher News Corp. fell 60 cents, or 3 percent, to $19.57, and shares of Media General Inc. gave up 19 cents to $42.71.

Bucking the trend, shares of Washington Post Co., which in addition to its flagship newspaper also owns test-preparation company Kaplan, gained $9.90 to $677.90, and shares of Journal Register Co. rose 2 cents, or 3.9 percent, to 54 cents.

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