PRM Ad Trends Weaker

The following excerpts explain why Zacks senior publishing industry analyst Ann Northrop, CFA remains neutral on PRIMEDIA, Inc. (PRM - Analyst Report), the publishing house:

"The advertising revenue in PRIMEDIA’s core apartment guide business (the majority of PRM’s revenue after the recently announced sale of the Enthusiast Media division) appears to be stabilizing (up 2.6% in 3Q07) after falling for three consecutive quarters (5.2% in 4Q06, 3.2% in 1Q07, and 0.5% in 2Q07) as the softening housing market slows condo conversions, and shrinks the business customer base.

"Meanwhile, PRIMEDIA divested its underperforming businesses (Education and Enthusiast Media segments), and sustained cost-cutting. Among cost-cutting measures, the company is consolidating its six offices in New York City into one, which is targeted to shave one-third of its occupancy costs or $4.2 million annually with $2.7 million to be realized in 2007. Together with other expense-saving initiatives, the company expects to cut its annual corporate overhead from $28.3 million in 2006 to approximately $11.7 million in 2007. Nevertheless, we expect weak industry-wide ad trends to continue and, therefore, don’t foresee a meaningful near-term recovery.

"PRIMEDIA’s 3Q07 adjusted EBITDA declined 14% year-over-year to $11.7 million due to decline in Consumer Guides’ adjusted EBITDA (declined 8.3% to $19.9 million), and slight increase in corporate overheads (increased 1.2% to $8.2 million). The company reported a loss per share of $0.86 in 3Q07 compared to a loss per share of $0.84 reported in 3Q06.

"On a GAAP basis, the company reported earnings per share of $8.95 compared to $1.18 per share reported in 3Q06. All considered, we rate the stock a Hold with a six-month price target of $9."

Read the full analyst report on PRM.

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