Extra! Extra! You can read all about Tribune's (NYSE:TRB) Q1 2006 earnings on Thursday morning. But first, here's the background for tomorrow's story.
What analysts say:
- Buy, sell, or waffle? Seventeen analysts follow Tribune, and aside from 11 waffling hold-raters, opinions are split down the middle: three buys and three sells.
- Revenues. The analysts are looking for a 1% slump in quarterly sales tomorrow.
- Earnings. Ouch! Earnings are expected to take a 15% dive.
What management says:
We seem to have a theme in the making. Just prior to preparing this Foolish Forecast, I looked at the recent news on Tribune peer New York Times (NYSE:NYT). What did the Times find fit to print? Slow revenue growth, costs rising faster than sales, and a commitment to cut costs.
Tribune's story is similar, but a bit more advanced. Its sales are actually down 3% year over year for the last six months. But in contrast to New York Times and its intention to cut costs, Tribune says it has already "taken aggressive steps to reduce expenses" and is now ready to make revenue growth a "top priority."
What management does:
Tribune's numbers back up that assessment. Although it's true that rolling gross, operating, and net margins are all down over the last 18 months, the company's cost-cutting measures have already begun showing up on the income statement. Over the last six months, the company's cost of goods sold rose 0.6% (which hurt margins), but the company has slashed selling, general, and administrative expenses by 11% in comparison to the second half of 2005 (which helped mitigate the margin erosion).
|
Margins % |
9/04 |
12/04 |
3/05 |
6/05 |
9/05 |
12/05 |
|---|---|---|---|---|---|---|
|
Gross |
53 |
52.7 |
52.3 |
51.9 |
51.7 |
51.1 |
|
Op. |
23.9 |
22.3 |
21.4 |
21.1 |
20.8 |
22.3 |
|
Net |
11.9 |
9.7 |
10.1 |
12.6 |
10.9 |
9.6 |
One Fool says:
Reviewing Tribune's last few income statements, I can't help noticing that Q4 2005 looks much worse than Q4 2004, primarily because of "one-time" items. In the 2005 quarter, Tribune took $85 million worth of restructuring-related charges. The equivalent sum from the previous year was just $2 million -- and the company recorded a $90 million benefit from a legal settlement to boot. The contrast between the quarters' respective charges/benefits made last quarter look much worse than Q4 2004. So if Tribune's moves to reduce costs are indeed basically complete, and those one-time items stop popping up on its financial statements, the firm's net could firm up considerably going forward.
Competitors:
- Dow Jones (NYSE:DJ)
- Gannett (NYSE:GCI)
- Knight-Ridder (NYSE:KRI)
Fool contributor Rich Smith does not own shares of any company named above.
