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Media Talk

Dow Jones: Ugly But Not A Disaster

Dow Jones (DJ) reported 3Q05 EPS of 12 cents, below consensus of 13 cents. The press release stated that 4Q05 EPS would be in the low to mid 30 cent range against current consensus of 47 cents. The press release went on to note that weekday ad lineage for the Wall Street Journal would be down in the mid-single digits despite meeting the “up slightly” guidance for September.
Upon reading this information I thought that the reaction in DJ stock would be ugly, much worse than current trading levels which are down about 2% from yesterday’s close. However, after listening to the conference call and reviewing other data, I think the news should be classified as disappointing but not a disaster.


First, the 4Q05 EPS guidance include 5-6 cents of dilution from the new Weekend Edition of the WSJ. I believe that some of the estimates still do not take this into account given that there is a 13 cent range from the high to low estimate. This still suggests lowered guidance but maybe just a nickel or so. Second, on the call management noted in response to heavy questioning that about 50% of the advertising in the initial editions of the Weekend Edition had been shifted from the weekday editions. Further, if this advertising were shifted back to weekdays, 4Q lineage guidance for the weekdays would be up slightly. Thus, no deterioration in recent slight improved trends.
While this is comforting news, it still leaves me with some questions and suggests that no significant turn in advertising trends or EPS is at hand:

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