At least one of the four regional newspaper divisions -- Interstate -- put out the word yesterday that The Indianapolis Star, Courier-Journal in Louisville, Ky., and other dailies need to re-examine budgets for Periods 6 through 12, a well-placed source tells me. I don't know whether a similar call was sent by the other three divisions. I'm still gathering information, and hope to provide an update soon.
Weak jobs report
Any budget revisions -- whether demands to boost advertising revenue, or cuts in spending -- would come as growth in the U.S. economy has lately shown signs of losing steam. That's pinching the outlook at virtually all companies.
Last Friday's June employment report was worse than expected; private employers added a meager 83,000 jobs in June and reduced the average work hours and earnings of all employees. Such weak hiring hurts consumer confidence. As shoppers skimp on spending, advertisers follow suit.
Overseas, bank debt woes tied to Greece, Spain and Portugal won't help, as fears spill over into the U.K., where Gannett's Newsquest division publishes 17 dailies and hundreds of other titles.
Companies push back
Publishers are arming themselves for a fight. In a new report, Zack's Investment Research noted yesterday: "To curb shrinking advertising revenues and improve market shares battered by the recent economic downturn, the publishing companies are now even considering charging readers for online content."
Gannett is one of those publishers; it erected paywalls last week at dailies in Greenville, S.C.; Tallahassee, Fla., and St. George, Utah.
Zack's also noted that advertising revenue losses have been narrowing at GCI and other newspaper companies.
Still, Gannett's revenue remains under pressure, and investors have grown pessimistic. For the second quarter, President Gracia Martore told Wall Street analysts early month, GCI's publishing side was expected to see a percentage decrease in revenue in "the low-to-mid single digits."
GCI stock down 24%
In a June 7 statement, she also noted that "most of the analysts' earnings per share estimates are between 47 cents and 58 cents and the company is comfortable that earnings per share from continuing operations, excluding certain tax items, will be toward the high end of that range." Absent any new whisper numbers, we can only guess that Corporate is still on track to hit those targets.
Stockholders in Gannett and other companies are anxious. GCI's stock closed yesterday at $13.13, unchanged for the day. In the past three months, however, shares have dived 24% vs. a smaller 14% drop in the S&P 500 index, a leading measure of the overall stock market.
Earlier: Morningstar analysts say Gannett shares 'overvalued'
What do you hear about your site's budget for the current and last quarters? Please post your replies in the comments section, below. To e-mail confidentially, write jimhopkins[at]gmail[dot-com]; see Tipsters Anonymous Policy in the rail, upper right.
[Image: today's Star, Newseum]
I have been dreading this, but there are indeed rumors something big is coming. It wasn't just Greece, but the economy noticeably slowed in May and June. Stock analyst group Zacks has a report out today on newspapers that says circulation declines are continuing, but at a slower rate. This is not good.
ReplyDeletehttp://www.zacks.com/stock/news/36528/Zacks+Industry+Outlook+Highlights%3A+McClatchy,+The+New+York+Times+and+Gannett
Gannett will be just fine. It will continue to cut people and print to keep profits up. If you're an investor that's what you want to hear. If you work there, well ...
ReplyDeleteThanks, 8:59; I've added some of the Zack's material to this post.
ReplyDeleteI'm now hearing about sharply higher ad sales goals. Maybe Corporate instead sees more economic growth ahead?
ReplyDeleteGannett goes through this exercise each and every year. Take a look at expenses from the first six, and make all of the properties spend no more in the last six (or even ask for cuts beyond what was spent in the first six months).
ReplyDeleteTake a look at revenue from the first six and project better than expected increases in the last six. This effort has nothing to do with economic growth by market.
Might seem like something unusual, but it's probably just decent fiscal management.
The net result will be cuts in the expense lines and Dickey will ask for increases in advertising revenue. More times than not, newspapers have been successful in delivering these results in the past.
Today, it's different. Costs are going up, the product is getting thinner (in many ways) and advertisers are looking for more cost-effective ways to spend money.
GCI the stock is properly valued at about $22 per share.
ReplyDeleteSome back-of-the-envelope math: Execs have said to expect the high range of analyst estimates of 47 to 58 cents for second quarter earnings. So let's take 55 cents as our number and annualize it: $0.55 X 4 quarters = $2.20 per share annual earnings. Slap a 10 P/E multiple on that (a very reasonable figure) and you get $22 per share, or about a 57 percent gain over today's close at about $14.
None of these numbers are pie in the sky. But the market currently has roughly a 6 P/E on GCI. A 15 P/E (typical average P/E of a fairly valued S & P 500 index) is probably too high for a company in a threatened industry like GCI, but a 6 P/E is too low for a company that throws off cash like this one and is paying off debt as rapidly as this one. Eventually, the market will correct this.
GCI the company sucks (I'm a former employee--I know). But GCI the stock is a buy. You do like to make money, right? Do not allow sentiment to interfere with your investing. Success is the best revenge.
"Never hold a grudge. While you're holding the grudge, the other guy is out dancing." -- Buddy Hackett.
4:58: So, how much are you in for?
ReplyDeleteI disagree with 4:58. P/E can mean a lot of things to many people and can be manipulated easily. Among companies with low p/e rates currently are Hartford Financial, and Ford has a 5.4 p/e.
ReplyDeleteA 15 p/e would be for an almost rock solid company that is expanding its business. The much hyped Apple has a p/e of 22.
I think the market has fairly priced GCI. This is an industry obviously in turmoil, and one that has yet to come up with a viable way of addressing the technological revolution. Advertising and circulation have collapsed in the last five years and have still not recovered. There is ample speculation advertisements won't come back, because advertisers have found it cheaper, more effective and efficient to do it themselves.
You know all this because you worked in the business.
In looking into this, I also discovered that in 2007 Countrywide Financial carried a p/e of 6. Remember back then how many said real estate would never go down? That was just four years ago.
BTW, I don't own any GCI.
Jim: I am in for 5,300 shares @ $4.05. Good practice says I should have taken profits during the run-up to $19-ish but I wanted to annualize the purchase for cap gains (tax) purposes. Now I'm past 365 days + 1 so should qualify for long-term cap gains tax rate. Unfortunately stock is now way off April high. Such is life. I'll live with it. This is what is called a high-quality problem. But I do believe we will see $22-ish in the next 12 months -- assuming dire economic predictions don't come true. Readers, of course, should do their own due diligence.
ReplyDelete