« New Tork Times Headline Remains: Do Not Buy | Main | Dow Jones: Transition To Digital Underway But Too Early To Own »

October 19, 2006

Tribune: As Bad The Cubs

Tribune (TRB) reported an unimportant quarter form the perspective of the near-term stock price. It is not just that the near-term will be dominated by the outcome of the strategic review due by year end. The quarter was just more of the same, which means bad, and won’t move the needle at all. In fact, my key takeaway from the call si that analyst question ran out after just 40 minutes of total length. It is sad to the once great newspaper slowly die but that appears to be what is happening. TRB and others are really just very long-term liquidation plays where you have to judge how much you are willing to pay for a secular loser of market share.....

TRB reported 43 cents on revenues of $1.35 billion. Consensus was 45 cents and $1.38 billion, so the numbers were slightly light. The September ad report was weak with newspaper tracking the industry decline of low single digit declines and TV, radio, and entertainment performing worse than expected. Real estate is still rising strongly, up over 20%. This will be a headwind in 2007 when other categories benefit from easy comps. Newspaper circulation revenue was down 6% but based solely on individually paid subscriptions the decline was 1-2%. As the self imposed bulk subscription pullback laps year over year the circ declines will improve. Interactive revenues were up 28% to $61 million and now represent 6-7% of total publishing revenue.

Cost control was good and along with higher than expected interest income and equity income supported EPS. Food Network provided the bulk of the upside and losses at CareerBuilder and the WB lessened.

The bottom line on fundamentals is that operating profits fell 17% for the corporation with publishing also down 17%. The outlook for 4Q is not much better except for the benefit of political advertising at the TV stations (which the street doesn’t pay for). October started softly for the newspapers but management expects November and December to improve. TV is picking up due to political. Cash expenses will again be tightly controlled. All this adds up to another weak quarter ahead.

I don’t see much upside from the strategic review as multiples are under severe pressure across all of TRB’s businesses. Long-term fundamentals are also weak, especially relative to other economic sectors. Beyond a cyclical pickup in advertising and easing comps, I see no reason to be interested in TRB.

Posted by Steve Birenberg at October 19, 2006 03:19 PM in TRB