Analysts Cautious on Mid-Year

By: Jennifer Saba Newspaper executives will be making their way to New York next week to present their financial forecasts for the second half of the year. Analysts aren't expecting much in the way of good news.

Bear Stearns' Alexis Quadrani wrote in a report that while May results are looking pretty good, she doesn't expect the trend to continue. Goldman Sachs' Peter Appert believes much the same expecting next week's Mid-Year Media Review to be "a relatively cautious affair."

However, Bear Stearns predicts the Tribune Co.'s share buyback offer will add some kick to the event. Better May results, "combined with Tribune's announced tender offer and the upcoming presentations next week ... could cause the newspaper stock values to flatten out and perhaps even bounce off their lows in the near term," said the Bear Stearns report.

Financial restructuring should be a common theme at the presentations having, in Goldman's view, both upside and negative implications. On the positive end, it can increase shareholder value in the near term. But it still masks fundamental industry problems, which Goldman believes, "ultimately control valuations."

Goldman Sachs wouldn't be surprised if publishers offer guidance on the second half of the year below expectations -- estimating a potential $.01 to $.05 knock in 2Q 2006 earnings.

Publishers will probably play up online growth "in an attempt to put a positive spin on the struggling core print business," said Bear Stearns.

Goldman Sachs breaks out an expected preview for each company noting Tribune will likely cover its recent plan to buy back 25% of company's shares and the Chandler's opposition. "Investors will want to know the likelihood and magnitude of any additional restructuring possibilities, including the likelihood that the company would sell or spin out its broadcast stations."

For Dow Jones, this will be Richard Zannino's first appearance as CEO. "We expect his presentation to focus on his strategic vision for how to rebuild the company's profitability over the next several years," said Goldman, which downgraded the company earlier this week. Also likely on the agenda: An update of Weekend Journal and the progress of the flagship redesign.

Management at The New York Times will highlight About.com given the anemic ad revenue growth at its New England properties, said Goldman, which also knocked the company down a rating last week. "Still love the franchise but we need to see sustained improvement in national ad revenues and a rebound in Boston before we love the stock."