By: E&P Staff Merrill Lynch changed its rating on two newspaper companies today upgrading E.W. Scripps from ?neutral? to ?buy? and downgrading Journal Register Co. from ?neutral? to ?sell.?
Merrill Lynch elevated Scripps because of a ?reasonable valuation? (9.5 times 2007 EBITDA) and the growth prospects at its Internet and cable properties.
?Scripps is projected to generate 57% of 2007 EBITDA from its high growth cable networks and 10% from its burgeoning Internet division leaving only 33% exposed to traditional media,? analysts wrote. ?Scripps is performing better than average in its traditional media businesses.?
Merrill Lynch lowered its rating on Journal Register due to weaker than average fundamentals and high leverage.
The company?s properties are exposed to a weak advertising environment, especially those in Michigan -- which represents roughly 25% of revenues -- an area beset by the sagging auto industry.
?We believer Journal Register shares deserve to trade at a discount given the below average fundamental outlook,? the note said.
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