By: E&P Staff Advertising revenues for Q2 are expected to be the industry's best performance in over six years -- with growth around 7%-8%, according to a report released on Friday by Goldman Sachs.
Advertising revenues continue to rise with solid performances in retail, national and classified categories. Even though April's growth fell behind that of March due to an early Easter, the investment firm thinks it's best to look at the two months together for a clearer picture. When doing so, March/April revenues were up about 7% (with January up 2.9%, February up 4.8% and March/April up 7%).
National and classified deserve the credit for the growth. "The performance in the national category has been particularly impressive, with estimated year-to-date growth of roughly 8%. Publishers have become more focused on what has been an under-represented category," the report said. A help-wanted rebound has lifted the classified category.
Goldman Sachs is also keeping a close eye on the recent contract negotiations between Abitibi and newsprint workers. If a strike caused the company to shut down, prices will move higher. The firm believes the strike will be avoided.
In general, with consumer spending up in April and the recovery of the employment market, the firm also expects that more money will be ploughed into advertising.
For Q2, EPS is expected to gain about 11.5%, slightly better than Q1 EPS growth of 10.9%. EPS should really take off in Q3 and Q4. "We believe the margin leverage in this recovery should be particularly impressive given the substantial reduction in fixed costs implemented by publishers. This will likely be a key driver for EPS growth in the second half," the report concluded.
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