Papers' profits in media spotlight (Dinosaur Media Extinction Alert)

CHICAGO (MarketWatch) -- Newspaper companies will be in focus as earnings season begins next week -- including McClatchy Co., which last month reached an agreement to acquire Knight Ridder Inc. for $6.5 billion -- as analysts will again look for indications that the industry's long slump is abating.

One is an uneven advertising environment, which, of course, plagues the wider media sector. For newspapers, there has been ongoing weakness in classified automotive ads and in many national categories, including technology, movies, wireless and transportation.

A shift toward online news consumption has hurt circulation at many newspapers, particularly in larger U.S. cities. And the National Do Not Call Registry, implemented two years ago, has made it more difficult for newspapers to solicit new subscribers.

Increased use of the Web has benefited newspapers in one way: Their online ad revenue has been climbing steadily as online help-wanted and real-estate ads have grown more popular. McClatchy (MNI) is slated to post first-quarter results before the market opens Thursday. Analysts polled by Thomson First Call are expecting a profit of 67 cents a share on revenue of $285.7 million.

In the year-earlier quarter, the publisher of the Minneapolis Star-Tribune reported net income of 69 cents a share on revenue of $280.9 million.

Analysts are likely to ask McClatchy executives for an update on the dozen Knight Ridder newspapers that McClatchy plans to divest, including the Philadelphia Inquirer and Philadelphia Daily News, the San Jose Mercury News and Ohio's Akron Beacon Journal.

Dean Singleton's MediaNews Group is believed to be the top contender to pick up some of the most desirable of those 12 properties. At an investor conference last month, USA Today publisher Gannett Co. (GCI) said it would consider some of the newspapers McClatchy has for sale.

Without necessarily commenting on who the suitors are, McClatchy may be asked whether the sale prices will be in line with prior expectations.

McClatchy may also provide an update on whether it will be able to hold on to Knight Ridder's stake in CareerBuilder, a three-way venture with Tribune Co. (TRB) and Gannett. Under the current agreement among the companies, Gannett and Tribune hold the right to buy out the one-third owned by Knight-Ridder if it is to be acquired.

When it announced the Knight Ridder deal, McClatchy said it would be talking to Tribune and Gannett about maintaining a partnership in CareerBuilder. Tribune and Gannett will also be asked about the situation during their quarterly earnings calls next week.

Knight Ridder (KRI) also is on the docket to report first-quarter results next week. Analysts foresee the company posting a profit of 59 cents a share on revenue of $732.8 million. A year ago, it reported net income of 79 cents a share on revenue of $724.7 million.

Gannett is set to report first-quarter results Wednesday morning. It's expected to earn 99 cents a share on revenue of $1.87 billion. A year earlier, it rang up a profit of $1.05 a share on revenue of $1.79 billion. Wall Street lowered its expectations for Gannett after the company said March 23 that it saw first-quarter earnings at the low end of a range between 98 cents a share and $1.02 a share.

Revenue at the company's 21 television stations should be up 40% from last year's first quarter, Gannett said, bolstered by ad sales related to Winter Olympic coverage on its NBC stations and the Super Bowl on its ABC affiliates.

At the newspaper division, Gannett said ad revenue was up in the first two months of 2006.

Have Stocks of Papers Hit Bottom?

By CONRADE DE AENLLE
Published: April 9, 2006

IT has become harder to make a buck in the news business, and some large newspaper publishers will announce this week just how many they managed to make in the first quarter.

The Gannett Company, the publisher of USA Today, and Media General, a publisher and broadcaster with properties concentrated in the Southeast, will report on Wednesday. The next day, it will be the turn of the Tribune Company, whose main titles are The Los Angeles Times and The Chicago Tribune, and The New York Times Company.

Analysts warn that the reports are not likely to make pleasant reading. While most newspaper companies are profitable, they have been in a commercial holding pattern for years, with advertising revenue sometimes static, or worse, and other forms of media usurping their customer bases.

"Industry numbers have been somewhat disappointing," said Frederick Searby, an analyst at J. P. Morgan. "It's going to be a very tough year again."

How disappointing and how tough? Lauren Rich Fine, an analyst who follows publishers for Merrill Lynch, predicts first-quarter earnings for the sector to be 3.5 percent lower than they were in the first quarter of 2005.

But investors' expectations are also lower. Newspaper stocks have declined steadily, and Ms. Fine contends that sentiment is gloomy enough to inoculate them from further loss.

"Large-cap newspaper stocks have bottomed," she declared in a note to Merrill clients. The extent to which they climb off of it may be limited, she said. "Specifically, Tribune's valuation looks appealing, but as we see no attempt by the company to surface value, we see little catalyst near term" for the stock to rally, Ms. Fine wrote. "Gannett also suffers from a lack of catalyst near term," she added, "but signs of a turnaround in the U.K. could provide a spark" in the second half.

(Gannett's Newsquest Media division in Britain has more than 300 titles.)

Mr. Searby expressed similar sentiments: little despair but little enthusiasm, either. He advised investors not to bottom-fish ahead of the earnings announcements.

"I'm not sure we've seen the worst of it," he said of the slump in share prices. "I don't think there's huge downside, but I don't think there will be anything in the numbers where people will say, 'Boy, I wish I'd bought this stock.' "

DATA WATCH For students of the economy, Wednesday will be a day of negative numbers with lots of digits in them. Reports are due on the nation's trade and fiscal balances.

The trade deficit is expected to have narrowed in February to $67.5 billion from $68.5 billion in January, according to a Bloomberg News poll of economists. The March fiscal deficit — how much the federal government spends beyond the revenue it takes in — is forecast to have reached $76.6 billion, up from $71.2 billion.

http://www.nytimes.com/2006/04/09/business/yourmoney/09mark.html?_r=1&oref=slogin

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