It's the same old story in the media world, and shareholders have probably grown tired of reading it. The latest version arrived this morning, courtesy of Dow Jones (NYSE:DJ), and while the names and dates may have been altered, the core message remaines the same: Circulation figures are flat, tight-fisted advertisers are keeping revenues in check, and about the only thing on the rise seems to be newsprint expenses. Against that challenging backdrop, the company posted adjusted first-quarter earnings of $0.11, a 50% drop from the $0.22 earned a year ago, on revenues that inched up 2.6% to $412.1 million.
Revenues in the print publishing segment dropped nearly 9% to $216.7 million for the quarter, with ad lineage for the U.S. and international editions of TheWall Street Journal down 8.0% and 14.8%, respectively. Advertising pages at Barron's were equally weak, coming in 12.9% below the totals from a year ago. With revenues on the decline, operating income in the segment swung from a $4.6 million gain to a $7.1 million loss. Dow Jones is unusually reliant on B2B advertising, particularly in the technology and financial sectors and, just like last quarter, spending in those key categories remains disappointing. Last month, they saw declines of 20% and 33%, respectively.
The company's 15 daily newspapers do provide some exposure to local advertising, which has generally been stronger, but it took some reading between the lines to find any good news this time around. Overall revenues in the segment showed a slim fractional gain, with ad sales climbing by just 1.9%. Rising expenses compounded matters, paring back operating margins by more than four points and driving operating income down by 21.5%. Meanwhile, industry-leader Gannett (NYSE:GCI) reported a 4.3% improvement in newspaper revenues earlier this week, led by a 4.8% gain at the flagship USA Today.
Dow Jones cannot claim a portfolio of television stations or cable networks (though it does provide content to CNBC and also has a syndicated radio program), and thus lacks the broadcasting revenues of Gannett, WashingtonPost (NYSE:WPO), Tribune (NYSE:TRB), and others, but it does own an array of successful Internet properties. The paid subscriber count at TheWall Street Journal's online counterpart rose to 731,000, a 5.2% increase from this point last year, and the newly acquired MarketWatch helped push electronic revenues (which now account for more than one-fourth of the total) up 35.7% to $117.2 million.
Dow Jones' efforts to boost its online presence are paying off, as advertising in that medium is clearly on the rise, while traditional print advertising continues to suffer under a multi-year slump. Furthermore, a new weekend edition of the Journal, expected to launch in September, should capture some of the spending that now goes to Sunday papers, and its consumer-oriented focus should help reduce dependence on business advertising.
Nevertheless, with rising costs chipping away at margins, a long-awaited rebound in ad spending still choppy at best, and recent guidance forecasting further profit erosion ahead, it is difficult to justify the rather expensive price tag (PEG ratio of 2) that has been attached to Dow Jones.
Like to read yesterday's news? Try these:
- The Post's Prognosis
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Fool contributor Nathan Slaughter owns none of the companies mentioned.
