NEW YORK, Oct 10 (Reuters) - U.S. newspaper publishers are expected to report tepid quarterly results this month as a weak housing market, slower economy and the Internet weigh on advertising revenue.
Gannett Co. Inc. (GCI.N: Quote, Profile, Research), the largest newspaper publisher in the U.S., will kick off the season this Wednesday with analysts expecting an 11.5 percent drop in profit to $262.8 million, according to Reuters Estimates. Gannett's papers include USA Today.
Media General Inc. (MEG.N: Quote, Profile, Research), publisher of the Richmond Times-Dispatch in Virginia, is expected to post a 6.8 percent decline to $9.1 million, and Journal Register Co. (GCI.N: Quote, Profile, Research) is expected to report a 36 percent drop in profit to $7.4 million, according to Reuters Estimates.
"Things are not good. Hopefully we're seeing the worst, at least for the time being," Benchmark Co. analyst Edward Atorino said.
Some publishers that also own television stations, such as Media General and Belo Corp. (BLC.N: Quote, Profile, Research), may get a lift in advertising before November mid-term elections.
"Local TV stations are primed to see a record-setting $1.6 billion in political advertising in a non-presidential (election) year," Prudential analyst Steven Barlow wrote in a research note dated Oct. 6.
Pressure on national, retail and real estate advertising may continue for a while, Citigroup analyst William Bird wrote in a note to investors on Oct. 8.
"A key risk for the group is that 2007 newspaper growth could be worse than expected," Bird wrote. "Real estate ad growth is likely to be slow as the U.S. housing market cools."
The Internet is also attracting more of the help-wanted advertising market, while retail advertising could decrease because of consolidation in that sector, Bird wrote.
WARNINGS
Media General, Dallas Morning News publisher Belo, Wall Street Journal publisher Dow Jones & Co. Inc. (DJ.N: Quote, Profile, Research) and The New York Times Co. (NYT.N: Quote, Profile, Research) all warned last month that weaker advertising would drag down the latest quarter's earnings.
Newspaper publishers in general have had years of weak performance as they tried to adapt to readers who increasingly use the Internet, mobile phones and other electronic media for news and entertainment.
Merrill Lynch analyst Lauren Rich Fine projected an 11.5 percent drop in per-share earnings across the U.S. newspaper industry in the third quarter, and forecast that six companies would report double-digit declines.
She also lowered her newspaper ad revenue forecast from 1.2 percent growth to flat in 2006, and from 1.1 percent growth to a 1.5 percent decline in 2007.
Deutsche Bank analyst Paul Ginocchio also lowered his ad revenue estimates for the fourth quarter and for 2007, because of real estate and help wanted ads.
But A.G. Edwards analyst Michael Kupinski wrote in a note on Oct. 4 that the advertising environment could improve.
"In our view, the Federal Reserve's end to interest rate hikes, coupled with lower gas prices, are increasing consumer discretionary income, which we believe will cause advertisers to increase their budgets," he wrote.
Benchmark's Atorino said there is some hope among investors for a turnaround in the fourth quarter, but they are not banking on it.
"This is not a group that instills a lot of confidence right now," he said.
