Prudential Picks Scripps, Tribune as Good Buys For Investors

By: Jennifer Saba For those investors hunting around for good buys, Prudential Equity Research has five value picks in its coverage universe -- and two of them are newspaper companies.

It's no real surprise that the darling of the sector, at least in the view of financial analysts, E.W. Scripps is on the list. The firm likes the company for its diversified portfolio and its focus on the fast-growing cable networks division.

That said, the stock has been languishing lately and Prudential cites two reasons why investors might be nervous: the potential of flat revenue growth in cable and some risky Internet investments.

Prudential swats away at both factors noting that Scripps was able to outperform its cable competitors by a large margin. "We think 2006-2007 will be slower than this past year, but it is already discounted in the stock price."

As for Scripps' Internet-related businesses, Prudential analysts said the company has a good track record and that there's little need for worry. "We expect above-average profit growth for [Scripps] for the next several years, and at today's price we think investors are paying only a value multiple for a core holding," analysts wrote.

The real shocker on Prudential's list is the Tribune Co. "This is our most controversial pick," wrote analysts. "There are two main reasons for our bullish stance. One, we think there is more activity to come on the asset disposal side, and that we have not heard the last from the Chandler family. Two, the company's fundamentals are improving slowly."

A note on the Chandler situation: The Wall Street Journal reported today that though there is still acrimony between the representatives of the Chandler Trusts and other Tribune board members, both parties are trying to work something out. The talks are going slowly and there is a still a wide gap on the vision, the Journal said.

Prudential expects Tribune?s newspaper division to eek out some revenue growth and thinks Newsday has gotten over the worst of its woes.

"While the Tribune team has been under fire, it has also been working on trying to right the ship for 18 months, and we are beginning to see results," analysts wrote.

Monster also makes Prudential's short list since the firm thinks the online recruitment company will continue to grow at 25% for the next three years. Though CareerBuilder is encroaching on Monster's territory, Prudential warns not to rely on CareerBuilder's revenue alone. "Without seeing profit numbers we wouldn't rely on just revenue as a metric to cede Monster's clear command of the U.S. Internet job market."

Prudential's other two picks are McGraw-Hill and Harte-Hanks.