Profits and Prophets: October

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Newspaper Sector 'Overvalued'

By Art Garcia

Wall Street, investors and much of the public don’t like and don’t trust the media — newspapers in particular. Lehman Brothers media analyst Craig Huber, who considers newspaper stocks “overvalued” as an investment, is especially not fond of them.
    He says earnings expectations for newspaper companies are too high and he gives the entire industry group an overall “negative rating” as investments. He includes Sacramento-based The McClatchy Company among his least favorite of the bunch.
    Of the 10 newspaper publishers he covers, Huber has two favorites, Washington Post Co., publisher of that newspaper and Newsweek, and Dow Jones & Co., publisher of The Wall Street Journal and Barron’s. He deems shares of both worthy of “overweighting” in investor portfolios. The New York Times Co., Gannett Co. and Journal Communications were given “equal weight” ratings.
    But slapped with “underweight” recommendations were Knight-Ridder, E.W. Scripps, Tribune Co., Journal Register and McClatchy (NYSE, MNI), publisher of 12 daily newspapers, including The Sacramento Bee, and 17 community papers with a combined average circulation of 1.4 million daily and 1.9 million Sunday. The Bee, founded during the Gold Rush in 1857, is the company’s second-largest property; its largest is the Star Tribune in Minneapolis-St. Paul, acquired in 1998.
    Elaine Lintecum, treasurer and head of investor relations at McClatchy, takes issue with Huber’s slam of the newspaper sector. “We’re viewed as a pure-play newspaper company, which is a bit of a misnomer,” she says.
Continued...

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