Wednesday, February 4, 2009

McClatchy's earnings preview

Anick Jesdanun from AP gives an overview of McClatchy's situation and says the major challenges facing the company are falling ad revenue and looming debt:
McClatchy Co., the owner of The Miami Herald, The Sacramento Bee and other newspapers, reports earnings for the fourth quarter and full year before the market opens Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Advertising revenue at McClatchy's newspapers has continued to drop as the recession compounded longer-term pressures from the ongoing migration of readers and advertisers to the Internet.

McClatchy said advertising revenue fell more than 20 percent in October and 22 percent in November compared with the previous year, the two steepest monthly declines in 2008.

December also looked to be disappointing, though possibly not as weak as October or November based on revenue reports released by other newspaper publishers so far. Newspapers typically count on a year-end boost from holiday retail promotions.

Like many other newspaper publishers, McClatchy is still profitable, but the ad revenue drop reduces cash flow, which in turn puts pressure on the company's ability to pay down debt and meet lender-imposed financial targets.

Last fall, McClatchy reached a new agreement with lenders giving it more flexibility to meet those targets for two years, at a cost of higher interest rates, but its $2.07 billion debt as of Sept. 28 will continue to weigh the company down.

McClatchy cut its dividend in half, to 9 cents a share, in September to conserve cash to pay down debt. It recently said it would suspend payments after its next one on April 1.

During the quarter, McClatchy announced a three-month trial with The Christian Science Monitor to share international coverage for print and online.

BY THE NUMBERS: On average, analysts polled by Thomson Reuters expect earnings of 30 cents per share on revenue of $470.5 million.

ANALYST TAKE: In December, Fitch Ratings warned that McClatchy "will be challenged to generate meaningful and consistent revenue growth" and noted that the decline in ad sales has hindered the company's progress in paying down debt.

In an October research note, Citi analysts said McClatchy's newspapers "are particularly impacted by the cyclical slowdown hitting the local and classified markets." Classified ads have dropped because of weaknesses in employment, real estate and the auto industry.

WHAT'S AHEAD: McClatchy has said it wants to retain its foreign bureaus, and it plans to share more of the Herald's Latin America coverage companywide in 2009.

STOCK PERFORMANCE: Shares in McClatchy declined 82 percent to 80 cents during the quarter. For the year, shares lost 94 percent.

Hat tip: Fitz and Jen

1 comment:

Walt Disney said...

The McClatchy Company, is about to face de-listing by the New York Stock Exchange That newspapers should be run as nonprofit organizations strikes me as a cop-out. We're only in the early innings of figuring out how new business models might replace the industrial-age structures of traditional newspapers, and we're already throwing in the towel.

But the non-profit model isn't a last-resort option; if anything, it's a first-best solution for anybody who wants to put journalism first and have the business side of the operation serve the editorial side, rather than the other way around.

Weber is right that the quality of foreign news you read is not necessarily directly proportional to the number of full-time foreign reporters that your local newspaper employs. But I think he overstretches here: