Industry Expects Lackluster Results in 1Q Reports This Week

By: (AP) The nation's largest newspaper companies, hampered by an erratic rebound in advertising, are expected to report mixed results when they begin announcing first-quarter results next week.

In recent forecasts, media barons continue to warn of "uneven" advertising demand. The bumpy ad recovery, coupled with recent declines in circulation, indicates that 2005 could mimic 2004's lackluster gains, some industry analysts predict.

"Retail advertising remains stuck in a relatively low growth mode [at less than] 3 percent," said Paul Ginocchio, newspaper analyst with Deutsche Bank. "Structural issues [such as] mergers and non-promotional retailers' share gains will dampen growth for the foreseeable future."

Meanwhile, without 2003's strong wireless telephone ad campaigns, national advertising continues to see slow growth; and help-wanted advertising, although up in the double-digit percentages, isn't gaining as much as hoped, added Ginocchio, who has kept his neutral rating on the sector. "Auto remains negative, and real estate could finally be running out of steam."

Merrill Lynch & Co. estimates that newspaper ad revenue gained 3.3 percent in the first quarter, below the brokerage's original estimate of 4 percent. Although ad revenue grew 4 percent through February, March likely decelerated because of an early Easter, typically a slow weekend for advertising, Merrill analyst Lauren Rich Fine wrote in a recent research report. "This should reverse in April."

Nevertheless, Fine, who has a neutral stance on the industry, said she isn't "looking for much momentum in either direction."

Along with sluggish advertising momentum, recent declines in readership at a number of newspapers have become a concern.

With many newspapers depending on telemarketing to sign up new subscribers, the do-not-call registry has been behind some of the recent declines. But demographics also are a big factor.

"Younger generations have grown up with news and information on demand thanks to the Internet," said Fine.

Merrill forecast newspaper companies will see a 2 percent decline in profit, on average, in the quarter.

Merrill's forecasts exclude Dow Jones & Co., which will report a steep drop in first-quarter earnings, hurt by weak financial and technology advertising at its flagship The Wall Street Journal. Dow Jones has also absorbed the cost of the coming launch of a Saturday edition of the newspaper and the acquisition of MarketWatch Inc.

Among other large publishers, Gannett Co., the publisher of USA Today and 100 other daily papers, is expected to report increased earnings despite recent complaints of "uneven" advertising demand.

The Washington Post Co., meanwhile, is expected to post a double-digit percentage gain in first-quarter profit, boosted by its fast-growing Kaplan education unit.

The New York Times Co. last month said first-quarter earnings will beat last year's, helped by a gain on the sale of its headquarters. Excluding that one-time gain, however, the publisher said profit would be down sharply from a year ago.


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