Not Much Good News Expected at Upcoming Investor Conferences

By: Jennifer Saba Dueling media conferences kick off next week, with investment firms Credit Suisse First Boston and UBS playing host to newspaper companies in mid-town New York. But don't expect much good news from newspaper companies, according to Goldman Sachs, which released a report today giving a sneak peak of the agendas.

Presenters will take a cautionary tone when discussing 2006 and Goldman thinks that earnings estimates will be revised downward (even below consensus). "We wouldn't be surprised to see a slightly negative response from the stocks," said the report.

The positive themes that will be addressed: Labor costs are under tight control, newsprint pricing should ease, and more share buybacks could be in the offing.

The negative themes to be discussed include anemic ad growth, challenging circulation, and margins that are under pressure.

Here are some of the highlights to be expected from the presenting companies:

Belo: Management will likely focus on its broadcast unit, especially its New Orleans and Houston stations following the impact from Hurricanes Katrina and Rita. The company relies heavily on broadcast (57% of 2005E EBITDA) and has suffered this year. However, 2006 is expected to ease up given the Olympic/election cycle, said the report.

Dow Jones: The Wall Street Journal is on shaky ground with ad "volumes remaining volatile on a month-to-month basis." The company is still trying to absorb the start up costs of the Weekend Journal, which analysts think is cannibalizing weekly ad lineage.

Gannett: The forecast should be conservative -- up in the low single digits, especially because of the hurdles the company is facing with its United Kingdom products.

Journal Communications: The company should update investors on the impact of the telecommunications contracts signed in 2005, which take effect in the first part of 2006.

Knight Ridder: Will not be presenting since the company is exploring a possible sale. Goldman Sachs and Morgan Stanley were retained as advisors.

McClatchy: The one bright star in terms of ad growth, McClatchy continues to outperform the industry. However, Goldman thinks management will take a more guarded approach to 2006 given the tough comparisons. And ad revenue at its largest newspaper, the Star Tribune in Minneapolis, has been soft.

The New York Times Co.: October was good to the company, but don't expect November to follow suit. Goldman forecasts limited upside in Q4. "While we are encouraged by the positive momentum at About.com, it is expected to account for less than 4% of 2006 earnings."

E.W. Scripps: Management will focus on its cable unit and the momentum of Shopzilla. Though Goldman suspects there will be questions on how the company can continue to sustain the growth in its cable division. The company should meet or beat Q4 earnings estimates.

Tribune: "Management has to be glad to be saying goodbye to 2005," said the report. Tribune had to weather soft ad and circulation growth, the replacement of its broadcast president, weak WB ratings, and a whopping $1 billion IRS payout. "While this backdrop should create easy comparisons going into 2006, unfortunately the earnings impact of some of these issues will likely linger in the new year."