Third-quarter income from continuing operations increased 5% to $22.3 million, or $0.49 per share. However, if you include items from last year (the company's third quarter last year included $0.11 in one-time adjustments such as "transition costs" and "reduction in value of intangibles"), then earnings decreased from last year.
The company's press announcement pointed out it was able to reduce its net debt by $110 million in the first three quarters, as well as generate strong free cash flow. However, Lee's free cash flow generation is decelerating, having decreased 9% to $42.9 million.
Advertising, of course, is a big reason why the newspaper industry is struggling, and Lee didn't have great news in that regard, either. Advertising revenue decreased 3.1%, despite a strong 61.2% increase in online advertising. Lee Enterprises' total revenues from continuing operations decreased 3.2%.
Earlier this year, I took a look at Lee Enterprises. While I can see that the company has some admirable qualities that might help insulate it, such as its focus on local markets, the fact that it was in the midst of a challenged industry made me think the risk wasn't worth the high price tag.
Lee's price has definitely mediated -- its trailing P/E has since dropped to 12 -- but investors are still left to wonder if it's going to have ample growth to justify its price tag. After all, its PEG ratio is still steep at 2.63. A quick peek at the expectations for earnings growth over the next couple of years don't look promising, with either decreasing or just about flat EPS growth anticipated.
Then, look at its competitors. Dow Jones
Back in June, Motley Fool Income Investor's James Early removed Lee from the service's list of recommendations for obvious reasons, and judging by its chart, it looks like that was a prudent decision. This is a tough industry all around right now, what with an advertising slowdown and the disruptive influences of news on the Web. I may have asked if Lee was cheap enough several months ago. Given little sign of strong recovery, that's still a legitimate question for investors to ask themselves.
Extra, extra! Get your extra articles about Lee Enterprises:
- In April, we were digesting the news at Lee.
- In January, I wondered, is Lee Enterprises so enterprising?
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