By: E&P Staff Newspaper economist Miles Groves said he was lowering his 2004 advertising expenditure forecast from 4.9% to 4.5% in his August newsletter.
From the looks of it, March is turning out to be the peak month with overall ad revenue for the first six months totaling 4.9%, with growth tapering off. The Newspaper Association of America's recent advertising spending report only added concern. The NAA said that second quarter advertising growth increased 4.1%. Groves forecasted 4.9%. For the second half, ad revenue grew 3.8% compared with Groves' estimate of 4.3%.
Newspaper stocks in the doldrums are not benefiting from good earnings. John Morton, one of the authors of the Morton-Groves newsletter, noted that the Q2 per-share earnings of 14 publicly owned companies (excluding Hollinger International) grew on average 15.5% ranging from 3% to 36%. Though earnings looked good, stocks suffered. "One would think such favorable earnings' performance would give a boost to these companies' stock prices but the reverse was true," Morton wrote. "By mid-August the stocks of 11 companies had dropped this month in a range of minus 0.4% to 7.3%."
Morton cites two reasons for the inconsistency. Investors are reacting to the "creeping malaise in the economy and perhaps, to the circulation inflation scandal(s)."
Though the circulation issues might be one of the problems, Morton applauded those companies that are directly involved with this issue and their "forthright" response. "Full disclosure is the only responsible policy," he wrote.
Comments
No comments on this item Please log in to comment by clicking here