By: Jennifer Saba After a meeting with executives at the Journal Register Co., Bear Stearns believes the company is well-positioned in the industry due to its small market presence.
The main reason for this outlook: The company is relatively sheltered from declines in department store and national advertising.
Still, Bear Stearns did mention in its note today that the company turned in lackluster January and February results -- an estimated 3.6% decline in ad revenue. Executives said that March was picking up, including at its Michigan cluster.
In addition, Journal Register could benefit from a potential flare-up regarding future union negotiations in Philadelphia. Sometime this summer the Newspaper Guild is expected to begin talks about new agreements that represent 3,100 Knight Ridder employees. Both The Philadelphia Inquirer and Daily News have guild contracts.
"We acknowledge that a breakdown in negotiations that hampers the daily production and distribution of the Philadelphia Inquirer and the Philadelphia Daily News, could result in a boon for Journal Register's properties, including their seven Philadelphia regional dailies," according to the note.
Bear Stearns is also impressed with the company's online and new product strategy. The Web sites are profitable with margins in the 70% range, said the research firm. And the company's non-English products are growing: in 2006, they are expected to generate $3 million in revenue, up 85% from the previous year. The new niche products including the Lehigh Valley Weekly should help ad revenue grow.
Bear Stearns reiterates its "peer perform" rating on Journal Register "as we continue to expect an uneven ad market through 2006."
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