For Immediate Release
Chicago, IL - April 11, 2016 - Today, Zacks Equity Research discusses the Publishing, including McClatchy Company ( MNI ) , New York Times Company ( NYT ) , General Mills, Inc. ( GIS ) and E.W. Scripps Company ( SSP ).
Will Diversification Bring a Better 2016?
The U.S. newspaper publishing industry has long been grappling with sinking advertising revenues, and the global economic meltdown has only worsened the situation. The downturn in the newspaper publishing industry witnessed over the last few years aggravated, as print readership declined, with more readers opting for free online news, thereby making the print-advertising model increasingly irrelevant.
Changing consumer preferences and the advent of new and innovative technologies have been altering the way news is offered and read. Readers now have a myriad of choices to collect and read articles or news through devices such as netbooks, tablets or other hand-held devices.
These have been weighing on the print industry, as advertisers now get low-cost avenues through which they can reach their target audience more effectively. We believe that an alternative and stable source of revenue is the demand of time, to salvage the dwindling print newspaper industry.
Waning Newspaper Advertising Revenues
Advertising remains a significant source of revenue for the industry that in turn depends on the health of the economy. The macroeconomic factors such as sluggishness in business spending, high unemployment and falling home sales may affect the level of national, retail and classified advertising revenues, as advertisers cut their budget in response to weak economic conditions.
Advertising volumes remain under pressure as advertisers still deter from making any upfront commitments in an economy under recovery. According to the data released by Kantar Media, advertising expenditures fell 12.9% year over year at Local Newspapers and 4.5% at National Newspapers during the third quarter of 2015.
The decline in advertising expenditures at Local Newspapers resulted from a drop in the volume of advertising space. A sharp reduction was witnessed across two categories, namely Auto Dealers and Retailers, on account of the allocation of budgets to digital media. Another category that declined in the double-digit rate was Real Estate, as advertisers aggressively shifted budgets to online media and television.
The McClatchy Company ( MNI ) witnessed a 16.4% drop in print advertising revenues during the fourth quarter of 2015 following a decline of 14.4% in the third quarter. Print advertising revenue fell 6.6% in the fourth quarter of 2015 following a decline of 0.9% in the third quarter at The New York Times Company ( NYT ).
Newspaper Companies Adapt to Changing Trends
Newspaper companies have now been remodeling and restructuring themselves to better align to the growing need of marketers, targeting younger people, affluent households and other demographic groups with multiple web and print publications. The publishing companies are adapting to the changing face of the multi-platform media universe, which currently includes Internet, mobile, tablet, social media networks and outdoor video advertising in its portfolio.
Newspaper publishing companies have been offloading assets that bear no direct relation to the core operations, diversifying revenue base and even separating their broadcasting and digital properties from the sluggish print business.
The companies are gradually advancing toward the pay-and-read model. The New York Times Company, on Mar 28, 2011, launched a pricing system for NYTimes.com, whereby after browsing a certain number of free articles, readers will be asked to subscribe for complete access to its articles on phones, tablet computers and the Internet.
The recent trend seen in the industry is that of consolidation. Diversified publishing conglomerate, Gannett Co., Inc. ( GCI ) in Oct 2015 entered into a deal to acquire Journal Media Group, Inc., the owner of the Milwaukee Journal Sentinel and other newspapers, for approximately $280 million.
Journal Media Group was formed after Journal Communications and E.W. Scripps merged their broadcasting operations and split the newspaper business. The merged broadcast and digital media company, headquartered in Cincinnati, retained the name The E.W. Scripps Company ( SSP ).
Gannett has also undertaken a massive rebranding, whereby it will bring in all its 92 local media brands plus its flagship national newspaper USA TODAY under one ambit - "USA TODAY NETWORK," which it thinks will help advertisers reach greater audience through various platforms.
Zacks Industry Rank
Within the Zacks Industry classification, Publishing forms part of the Consumer Staples sector, one of 16 Zacks sectors, though the media industry is part of the Consumer Discretionary sector. We rank all the 260 plus industries in the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. To learn more visit: About Zacks Industry Rank .
As a point of reference, the outlook for industries with Zacks Industry Rank #88 and lower is 'Positive,' between #89 and #176 is 'Neutral' and #177 and higher is 'Negative.' The Zacks Industry Rank for Publishing Newspaper is #176.
Analyzing the Zacks Industry Rank, it is apparent that the outlook on the Publishing Newspaper industry is showcasing a Neutral view.
The broader Consumer Staples sector portrays a soft trend. In the fourth quarter of 2015, total earnings for the sector declined 6.3%, while total revenue fell 7.3%.
Looking at the consensus earnings expectations, we remain apprehensive about first-quarter 2016, earnings for which are projected to drop 3.7%. For the second quarter, the earnings forecast indicates a decline of 1.8%. On the revenue front, we remain cautious on the sector, which is forecasting a decline of 0.5% in the first quarter of 2016 but building up confidence for the second quarter with projected growth of 0.8%.
For more details about earnings for this sector and others, please read our ' Earnings Trends ' report.
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