Earnings preview: McClatchy

McClatchy Co. reports second-quarter earnings Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: McClatchy is expected to report sharply lower profit and revenue in the quarter ended June 30. It is battling declines in ad spending as advertisers follow readers online. A marked increase in newsprint costs is also pressuring margins.

The company has been especially hurt by the concentration of steep real estate declines in California and Florida, since it owns papers in both states.

McClatchy swung to a loss in the first quarter as a weakening economy and competition from online rivals led to a 15 percent drop in advertising revenues at its newspapers.

BY THE NUMBERS: Analysts expect McClatchy to report profit of 21 cents per share on revenue of $495 million, according to Thomson Financial.

ANALYST TAKE: Lehman Brothers analyst Craig Huber, who is down on the entire newspaper industry, rates McClatchy "underweight." He expects falling circulation and ad revenue, higher newsprint costs and no meaningful revenue gains in online properties to keep second-quarter earnings muted.

He also said the slowing economy will exacerbate already poor industry fundamentals.

WHAT'S AHEAD: The company had more than $2 billion in debt at the end of March and was looking to reduce that amount through early redemptions. But if revenues fall sharply, that goal could be in danger because of the lower cash flow.

STOCK PERFORMANCE: McClatchy shares fell 37 percent in the period to finish June at $6.78. The stock hit a multiyear low of $4.46 last week and is down more than 80 percent from its 12-month high of $26.97.