By: Jennifer Saba Newspaper advertising revenues for the fourth quarter in 2005 are expected to advance 0.1% -- one of the weakest quarterly performances in several years, said a report issued today by Goldman Sachs.
The category culprits for the poor performance include retail and auto advertising -- down 1% and 15% in Q4, respectively. "We see no evidence of a turn in the retail or auto categories," said the report.
January is supposed to pick up a bit but that's not saying much since December ad revenues declined an estimated 0.6%. Ad revenues for January are forecasted to advance "no more than 1%."
The research firm estimates that revenues need to grow 2% to 3% in 2006 to sustain margins. "The good news: if revenue growth accelerates, there is significant operating leverage given the reduction of fixed costs. The bad news: we do not see any evidence of improved revenue dynamics," said the report.
Goldman Sachs forecasts that Q1 ad revenue will grow about 1%-2%, "consistent with our full year forecast."
It also noted that newspaper publishers reported lower profit margins in 2005, "as aggressive cost reduction efforts were not sufficient to fully offset the impact of anemic revenue growth and higher newsprint prices."
Goldman added: "Key to near-term sector performance, in our view, is the outcome of Knight-Ridder's strategic review."
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