Friday, July 24, 2009

David Kaplan's newspaper warning: "don't be fooled by the profits"

David Kaplan says investors shouldn't get excited about the newspaper companies that posted positive earnings last quarter:

A quick glance at the net income of four Q2 earnings releases from newspaper publishers Gannett (NYSE: GCI), The McClatchy Company (NYSE: MNI), Media General (NYSE: MEG) and The New York Times Co. (NYSE: NYT) almost make it seem like the worst is over, as all of the companies posted profits. And even though revenues were down by double digits for all, optimistic execs made it sound as if the declines were slowing, holding out the possibility for a turnaround. The results beat analysts’ expectations in most cases.

In three of the four cases, the newspaper publishers’ profitability was based on the aggressive cost-cutting all have taken over the past year (the NYTCo benefited from a favorable tax charge). As Outsell’s Ken Doctor notes, each of the four all sliced expenses between 20 and 29 percent. “The results of the past week primarily shows that expense control has kicked in,” said Alan D. Mutter. “The industry is
wondering if newspapers have hit bottom and will stabilize.”

But it’s pretty likely that this “return to profitability” is only temporary, as more drastic changes are sure to come. Even if the economy turns around, think of the past week’s earnings as a small break from the pain the newspaper industry is going through.

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Hat tip: comments


Anonymous said...

Should be interesting how they hawk their flim flam starting next quarter when the bottom fell out in earnest.

Anyone who doesn't beat those estimates is toast.

jay fredrickson said...

Why can't people see the economy has bottomed and that the next move is up? The newspaper industry has always been a leading indicator, and I believe this is the case here as well. This stock will be at $2.15 or higher in the next 12 months.

Anonymous said...

7:47 AM LOL That's it sparky. Pimp em till they bleed.

Anonymous said...

With no hope for a revenue increase which is years away when the company is 10% of it's current size..... the stock lingers in pumperville

Peter Weinberger said...

After reading this article, I think the editor of this blog is having difficulty handling the fact McClatchy is doing something right. The stock has doubled in a very short period of time. Most of this due to cost savings and pushing towards the internet. There are other articles that support this. Although it's been painful, a healthier company does benefit the people who still work there.

Anonymous said...

News flash: McClatchy's internet revenue also was in the negative for the 2nd Quarter.

Anonymous said...

The truth lies between the extremes of opinion voiced on this blog. There are the people who say MNI will go bankrupt (which, really, isn't that bad...) and there are those who believe all will be well as soon as the economy stabilizes.

No doubt the economy will come around. It always does. And some, maybe many, advertisers will go back to *print*... but why? Because they don't know better. And online advertising will never make up for the lost print revenue.

Anonymous said...

After reading this article, I think the editor of this blog is having difficulty handling the fact McClatchy is doing something right.

After reading this post, I think the writer of this post doesn't understand that the editor of this blog didn't write the article.

I also think the writer of this post is hanging onto pipe dream and willfully ignoring the reality of his paper's situation in that their revenues have been falling for several years and this trend is merely accelerated by the economic environment.

He doesn't understand that the only way to maintain these levels of cannibalistic profits are to continue cutting staff, quality, product and service. He doesn't understand that his time is coming along with many, many more.

Anonymous said...

A point to keep in mind: when print ad revenue comes back (which it will, although never to the levels it had before) McClatchy will be sustaining an organization that is one-half to two-thirds the size it was several years ago when bloated margins were the norm. And the company at long last seems to be ditching expensive, wasteful items like vacation accruals and outrageously rich sick plans (10 paid sick days a year at many legacy McClatchy papers, for God's sake; at my paper we are allowed 5 to use IF we are sick and I have only used about 2 in the last 2 years). McClatchy is slow to catch up to the market because it is hidebound by personnel practices dictated by a paternalistic, union-licked culture. Face it -- things were bound to have to change someday and the economy just made it happen real REAL quick.