Focus on Gannett
Interview: Blaylock & Partners---Atorino, Ed---Analyst (slow)
>> martha stewart does not expect to go to jail. the ind interview is scheduled for broadcast in early november on the abc news program 20/20. stewart resigned as chief executive of the company that bears her name and is currently preparing for her criminal trial in january. she is charged with fraud, obstructing justice and lying to federal investors for her role in an insider trading case involving imclone system stock . stewart faces up to 10 years in prison if convicted. newspaper stocks finished the day higher ahead of a busy week for earnings. tomorrow we’ll get third quarter results from the biggest u.s. newspaper publisher gannett. ed adarino analyst at blaylock and partners joins us to look at the outlook for the industry. welcome, ed.
>> what do you expect from gannett.
>> a dollar a share a little below consensus. local advertising has been pretty weak, both for the newspapers and broadcast sector. plus gannett is doing without political advertising this year, so i think they may have trouble hitting the street numbers, which i think still have some sort of old data in there, in my opinion.
>> we are hearing a lot more about how the economy is getting better, many reports showing much more spending by consumers and businesses starting to spend. but this idea that local ad revenues aren’t keeping up with that is not unique to gannett.
>> that’s true. local advertising is lagging. we’ve seen pretty good strength in the national category. if you look at the networks, big magazines, and even national newspapers. but in july and august it appears that a lot of the local business people decided to sit in the budget, so to speak, and see if business would get better when the fall came. with colder weather and the turn of the season, perhaps we’ll see a little pickup in local, towards the balance of the year. from what we are hearing it’s not starting to pick up very much yet.
>> what are companies like gannett saying about that? are they expect things to get better or are they going to have to manage somewhat quively for the rest of the year.
>> i think the answer is both. they certainly aren’t expecting a dramatic uptick any time soon. that forced a lot of these companies to reinstitute cost controls,pute the screws down to make sure they deliver earnings expectations in the face of what has been a more difficult year than they anticipated.
>> gannett has its fingers in just about every aspect of media. which ones are doing well for them and which are doing more poorly.
>> the ones that are doing more poorly are the television stations. that’s mostly because of the lack of political advertising this year versus last year. they had 80 million in political business last year. their newspapers are sort of ok. they are not really terrible but they are not really great. they are up a couple of% year to date. u.s.a. today has been struggling. gannett also gets some help from the u.k. operations. so they are about in line with the industry growth rate of somewhere around 2% for the third quarter so far.
>> what about this political advertising aspect? why are they not doing it?
>> well, this year there is no political advertising because of the lack of the presidential elections. except for california, political spending was pretty meager this year. but in 2004 i think we’ll see another ramp up, and we could probably see significant political advertising starting from the spring right through november for the presidential elections. and i’m sure the democrats are going to spend a lot of money to see who gets nominated, and then who gets elected.
>> isn’t that something that the tv stations in a good economic climate aren’t always wild about because they have to give the lowest rates to the political advertisers.
>> there is a little squeezeout when the political money pours in and squeezes out some of the regular advertising. but netanyahu it’s a very nice to have all those dollars coming in the door.
>> you didn’t mention gannett’s radio business. clear channel and viacom have complained about advertising sales for that. how about for gannett.
>> gannett is pretty much out of the radio business. and they are just into television and newspapers right now.
>> ok. television stations seeing any kind of hope from the national numbers.
>> yes, national is doing pretty well. the networks are very sold out. scatter prices are up sharply in the fourth quarter. there is some spillover into the national spot. environment which is about half the business, again, it’s the old local problem of advertisers are holding back at least for the moment, and maybe the fourth quarter has some good news. certainly 2004 should be better.
>> which companies are going to do the best?
>> i think viacom, it’s one of my favorite stocks . i don’t follow it personally. john tinker does. viacom has the cbs station, the cbs networks, the ratings are good and the cable business looks pretty good. we think viacom will be one of the leaders coming out of this slowdown into next year.
>> anybody that’s in bad shape?
>> nobody is really in bad shape. i mean these companies have seen a very serious slowdown over the last several quarters. and it’s getting better but not fast enough. so the worst is over. they are not in bad shape. but i think most of the companies would have liked to have seen a little better growth now.
>> gannett, just to wrap up, you expect them to report earnings, decent earnings, but not as good. what about going forward?
>> i think the fourth quarter will be even better for the newspapers. but again with television it’s going to be tough. they’ve got to replace that political money that was in last year. so it’s going to be a real challenge for gannett to hit the street numbers through the balance of this year.
>> thank you very much.
>> ed atarino. u.s. stocks rose monday on optimism some companies will lift profit forecasts when they report third quarter earnings. how is this affecting asian rivals? we’ll have a look.
