Goldman Sachs: GateHouse Remains One of the Sector's Best Buys

By: E&P Staff GateHouse Media is still getting the thumbs up from Goldman Sachs despite deteriorating newspaper advertising revenue besieging the sector.

"In an industry characterized by secular challenges, yet healthy free cash flow generation, we like the company's strategy of growing free cash flow through acquisition and returning it to shareholders in the form of a dividend," with a yield over 9%, wrote Goldman Sachs lead analyst Peter Appert in a note issued today.

However, GateHouse is feeling the pressure of the newspaper sector at large over sinking advertising revenue and high levels of debt. This has weighed on GateHouse shares, noted Appert, since its secondary offering. GateHouse is down 11% since mid-July, while the S&P500 fell about 7% over the same period.

GateHouse has its advantages including its local focus, which insulates the company at least partially from the worries faced by big metros. Additionally, GateHouse's revenue growth outpaces its peers.

Goldman did lower its price target from $25 to $22 on the company though analysts wrote GateHouse's cash flow is adequate enough to sustain its dividend and pay off some debt.

Goldman Sachs maintained its "buy" rating on GateHouse.


No comments on this item Please log in to comment by clicking here