Goldman, B of A Analysts See Bad Omens in April Results

By: Jennifer Saba Two equity research firms released reports today that point to a troubling trend in light of April's ad revenue results.

Goldman Sachs' Peter Appert noted that a soft advertising environment persists -- even in April, a month in which results were expected to benefit from the shift of Easter to March. He calculated that industry ad revenue for the month grew 2.8%, calling the performance "uninspiring." May is expected to come in along the same lines.

National ad revenue dropped for the second consecutive month despite easy comparisons, Appert wrote. Retail also slowed in April, growing only 1.8% versus March's 3.5% increase.

"In context of anemic ad revenue growth, circulation revenue declines, a downward bias in earnings estimates, and valuations that are approaching but have not yet reached 'value' levels, we do not see any near-term catalysts to suggest a more positive view on the newspaper stocks," Appert wrote.

Banc of America Securities' John Janedis cited the same worries going so far to ask: A brewing secular storm? "Absent a substantial pick-up in ads over the next two months, Q2 revenues and more importantly, 2005 earnings appear to be at risk for most operators," he wrote in his report. Also a downer for papers: Though "Star Wars Episode III: Revenge of the Sith" set box-off records, Fox probably didn't spend a lot in print to promote the film.

Janedis points out that online revenue is responsible for most growth, "with several companies displaying flat to negative growth excluding online revenues," he wrote.

For May, online job postings remains mixed with The New York Times up 48%, The Boston Globe up 3%, The San Diego Union-Tribune up 7%, the St. Louis Post-Dispatch up 7%, and the New Haven Register up 15%.

Online real estate postings in May also mixed: the Times up 15%, the Globe up 58%, the Union-Tribune up 19%, the Post-Dispatch down 33%, and the Register up 10%.