It has been a busy week for media watchers -- make that watchers of media stocks, not the media itself. The New York Times
Each of the first four managed to post modest earnings growth, though Scripps could do that only after excluding a one-time tax gain from last year, and New York Times reported growth on only a per-share basis, as net income actually dropped slightly. Dow Jones, though, is trading lower today after posting earnings of $0.43, below expectations and flat from the year before. Including unusual items (last year's equity swap with a German publisher), net income fell 19% to $35.6 million on revenues that edged up 3.9% to $437.2 million.
Most companies in the industry own a portfolio of network-affiliated television stations or cable networks to pick up the slack when traditional print advertising is stuck in the doldrums. For example, broadcasting revenues at Gannett's 21 stations jumped nearly 19%, and Scripps network segment profits soared 37% in the latest quarter. Dow Jones, though, is almost entirely reliant on print and online publishing.
Much of Dow Jones' recent weakness can be attributed to declining advertising lineage at the flagship Wall Street Journal, which fell 5.1% domestically and 8.6% internationally. Advertising at Barron's, though, was up 10.7% for the quarter. Overall, print publishing revenues (which account for roughly 60% of the total) fell 2.1% to $247.9 million. With tighter cost controls in place, though, operating margins in the segment rose substantially to 10.6%, helping to drive operating income 40% higher to $26.2 million.
Dow Jones also operates a number of websites, including Dow Jones Newswires, WSJ.com, and, after a pricey $528 million acquisition, MarketWatch. Its Internet properties raked in $101 million in predominately subscription-based sales, a 21% improvement from the year before. The company also owns 15 daily newspapers spread throughout nine states, which contributed another $88 million (up 5%) to revenues.
Dow Jones is unusually reliant on financial and, to a lesser extent, technology advertising; according to some estimates the two combined constitute around 40% of TheWall Street Journal's ad spending. Unfortunately, neither has been particularly strong lately, and tech ad lineage fell 27% in the quarter.
And things aren't looking too much brighter in the near future, as the company steered first-quarter earnings guidance (excluding dilution from the MarketWatch purchase and other items) to the $0.12 to $0.15 range -- about half of the $0.24 that analysts had been expecting. Dow Jones has taken steps to reduce its dependence on those two advertising groups and in September will premiere a weekend edition of the Journal designed to capture some of the advertising that now appears in Sunday newspapers.
For now, though, Dow Jones' results just don't appear to be news worth spreading.
Fool contributor Nathan Slaughter owns none of the companies mentioned.