By: Jennifer Saba The Tribune Co.'s latest revelations about circulation reductions at Newsday and Hoy have been greeted with mixed reactions from Wall Street.
Goldman Sachs issued a report downgrading the stock from Outperform to In-Line due to little upside in the near-term. The investment firm said it was losing patience with the company, especially in light of the last week's news: ?The most recent circulation restatement at Newsday increases the probability, in our view, that there could be more bad news to come on the circulation front.? The report takes that statement one step further by saying that ?it's hard not to be concerned that similar problems could emerge at Tribune's other newspapers.?
Merrill Lynch, however, issued a note maintaining its Buy rating based on Tribune's attractive mix of assets, inexpensive valuation, and expected growth in broadcasting.
As for the circulation scandal, the firm continues to view it as an ?isolated event,? though the report does express worry that there are no real assurances from management that there will be no further charges. On Friday, Tribune announced that it was taking an additional $45 to $60 million pre-tax charge on top of the original $35 million estimate for advertiser's compensation. Merrill Lynch's sense is that ?Tribune is being prudent? with that amount.
The report stated that further strains between Newsday and advertisers seem to be at minimum and it expects Newsday to release its new rate card in October with a rate reduction of 10%.
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