By: Jennifer Saba Goldman Sachs warned eager investors scouring for rock bottom deals to remain cool. In a note released today, the research firm reported the phone lines have been ringing more than usual this summer; investors are looking for any reason to be bullish on newspaper stocks before they turn. "To these investors we say ... patience!"
The outlook doesn't trend upward according to Goldman, which once again repeated the second half of 2005 is going to be more of the same -- soft earnings, disappointing revenue growth, and contracting margins.
Bolstering the forecast, newspaper ad revenue in June grew 1.3%, ?the industry's weakest performance this year.? Second quarter ad revenue rose about 2.4% versus the 3.3% increase in Q1. National continues to be the weakest of all categories and now retail and classified are losing steam. Classified revenue went from 7.8% growth in April to 3.9% in May to 2.8% in June.
Goldman estimates that ad revenue will advance 3% in the second half of the year versus its prior forecast of 3.5%. The cost-cutting measures publishers have been relying on will become more challenging which also adds margin pressure to the second half.
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