Foolish Forecast: NYT Goes to Print

Extra! Extra! Want to read all about how the New York Times (NYSE: NYT  ) is doing, business-wise? Get your red-hot Q1 2006 earnings report tomorrow morning, and you'll see all the numbers that are fit to print.

What analysts say:

  • Buy, sell, or waffle? Fifteen analysts consider New York Times required reading, but 12 of them only pretend to read it as they pencil "hold" ratings into the crossword puzzle. Of the three with opinions, two say the stock's a buy, and one a sell.
  • Revenues. Sales are only expected to rise 3% in comparison to last year, to $832.1 million.
  • Earnings. Profits look likely to head the other way. The consensus calls for a 10% slide, to $0.27 per share.

What management says:
In its January earnings report for Q4 and full-year 2005, New York Times reported a 41% decline in year-over-year profit, on a 3% decline in sales. Recognizing that it has some problems in the sales department (while noting that ad revenue was regaining strength), New York Times laid out several objectives to help put some oomph back in its earnings:

  • "Cost discipline continues to be a top priority."
  • "In 2006 we plan to focus on improving the margins of our businesses ."
  • "This year we expect advertising revenues across our newspaper properties to be helped by increased rates ."

What management does:
Over the last six months, New York Times' revenues grew 2.6% in comparison to H2 2004. Meanwhile, cost of goods sold (COGS) rose 5.6%, and selling, general, and administrative expenses (SG&A) increased 9.5%. So the company's right on the money regarding what it needs to do. Costs are out of control and have to be brought back in line. If the company can push through advertising-rate increases and make them stick, it could help improve the ugly picture shown below.

Margins %

9/04

12/04

3/05

6/05

9/05

12/05

Gross

55.1

55.3

55.1

55

54.7

54.3

Op.

15.9

15.6

14.8

14

13.5

12.6

Net

8.9

8.9

10.4

9.9

9.1

7.7

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

One Fool says:
After reviewing the last earnings report, my Foolish colleague Alyce Lomax remained unconvinced that New York Times could turn things around. Although the company's shares seemed cheap at a P/E of 13 (they trade for 14 times trailing earnings today), its industry's larger trends show readers continuing to defect from paid newspaper subscriptions in favor of free Internet news sources. With New York Times' plan for increased profitability largely resting on attempts to raise advertising and subscription rates, the company appears to be swimming against the tide here.

Competitors:

  • Dow Jones (NYSE: DJ  )
  • Gannett (NYSE: GCI  )
  • News Corp. (NYSE: NWS  )

Fool contributorRich Smithdoes not own shares of any company named above.


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