By: Jennifer Saba All newspaper investor eyes are on Knight Ridder's potential sale, reiterates Goldman Sachs in a report about the valuation of the company and the impact it will have on the sector.
If bids, which are expected in March, come in at least 10 times EBITDA translating to a share price in the high $60 range, the sector should enjoy a rally. If bids are lacking, i.e. anything about 9 times EBITDA, analysts for Goldman Sachs said the newspaper group would be 10% to 15% "overvalued."
The research firm maintained its "cautious" rating on the sector.
Though the group?s stock are up so far this year, 1.9% versus the S&P500's 3.2% gain, it has mostly Dow Jones to thank. Shares are up 11% year-to-date, said Goldman Sachs, driven by improved ad trends at The Wall Street Journal and positive management changes. Excluding Dow Jones, the group is flat on a year-to-date basis.
Meanwhile, ad revenue should continue to be soft in 2006. January ad revenue was up roughly 1% and February increased about 1.5%.
The results are not consistent; E.W. Scripps and Media General reported comparatively stellar ad revenue, up roughly 5% to 6% while Tribune and The New York Times Co. lagged, flat to down slightly. Gannett, too, continues to report soft results.
Goldman Sachs estimates 2% ad revenue growth for full year 2006, equal to 2005's performance.
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