For Immediate Release
Chicago, IL – November 09, 2016 – Today, Zacks Equity Research discusses the Publishing, Part 1, including McClatchy Company (NYSE:(MNI - Free Report) –Free Report),New York Times Company (NYSE:(NYT - Free Report) –Free Report),New Media Investment Group Inc. (NYSE:(NEWM - Free Report) –Free Report),Gannett Co., Inc. (NYSE:(GCI - Free Report) –Free Report) and E.W. Scripps Company (NYSE:(SSP - Free Report) – Free Report).
Industry: Publishing, Part 1
The U.S. newspaper publishing industry has long been grappling with sinking advertising revenues, and the global economic slowdown has only worsened the situation. The downturn in the newspaper publishing industry witnessed over the last few years was aggravated as print readership declined, with more readers opting for online news, thereby making the print-advertising model increasingly irrelevant.
Changing consumer preferences and the advent of new and innovative technologies have been altering the way news is offered and read. Readers now have myriad choices to collect and read articles or news through devices such as netbooks, tablets or other hand-held devices. Advertisers are now tapping the online video boom to reach their audience.
These factors have been weighing on the print industry, as advertisers now get low-cost avenues to reach their target audience more effectively. Per media reports, significantly lower print advertising demand is being witnessed across the retail, financial as well as telecommunication sectors.
We believe that an alternative and stable source of revenue is the demand of time, to salvage the dwindling print newspaper industry. To deal with the situation, newspaper companies are trimming their operations, lowering headcounts, revamping their print editions and investing in digital initiatives.
Waning Newspaper Advertising Revenues
Advertising remains a significant source of revenue for the industry that in turn depends on the health of the economy. The macroeconomic factors such as sluggishness in business spending, high unemployment and falling home sales may affect the level of national, retail and classified advertising revenues, as advertisers cut their budget in response to weak economic conditions.
Advertising volumes remain under pressure as advertisers still deter from making any upfront commitments in an economy under recovery.The McClatchy Company (NYSE:(MNI - Free Report) – Free Report) witnessed a 17.2% drop in print advertising revenues during the third quarter of 2016 following a decline of 16.6% in the second quarter. Print advertising revenue fell 18.5% in the third quarter, following a decline of 14.1% in the preceding quarter at The New York Times Company (NYSE:(NYT - Free Report) – Free Report).
Newspaper Companies Adapting to Changing Trends
Newspaper companies have now been remodeling and restructuring themselves to better align with the growing need of marketers, targeting younger people, affluent households and other demographic groups with multiple web and print publications. Publishing companies are adapting to the changing face of the multi-platform media universe, which currently includes Internet, mobile, tablet, social media networks and outdoor video advertising in its portfolio.
In Aug 2016, McClatchy launched a new digital advertising agency, ‘excelerate,’ to provide marketing solutions to local and regional advertising clients. The company’s digital-only advertising revenue surged 15.2% in the third quarter of 2016, while total digital advertising revenue increased 4.9% from the year-ago period. The New York Times Company’s digital advertising revenue soared 21.4% while New Media Investment Group Inc.’s (NYSE:(NEWM - Free Report) – Free Report) digital revenue increased 10.5% during the third quarter.
Newspaper publishing companies have been offloading assets that bear no direct relation to the core operations, diversifying revenue base, and even separating their broadcasting and digital properties from the sluggish print business.
The companies are gradually advancing toward the pay-and-read model. The New York Times Company, on Mar 28, 2011, launched a pricing system for NYTimes.com, whereby after browsing a certain number of free articles, readers will be asked to subscribe for complete access to its articles on phones, tablet computers and the Internet.
The recent trend witnessed in the industry is that of consolidation. Diversified publishing conglomerate, Gannett Co., Inc. (NYSE:(GCI - Free Report) – Free Report) in Oct 2015 entered into a deal to acquire Journal Media Group, Inc., the owner of the Milwaukee JournalSentinel and other newspapers. In Apr 2016, the company completed the acquisition of all of the remaining shares. Journal Media Group was formed after Journal Communications and E.W. Scripps merged their broadcasting operations and split the newspaper business. The merged broadcast and digital media company, headquartered in Cincinnati, retained the nameThe E.W. Scripps Company (NYSE:(SSP - Free Report) – Free Report).
Zacks Industry Rank
Within the Zacks Industry classification, Publishing forms part of the Consumer Staples sector, one of the 16 Zacks sectors, though the media industry is part of the Consumer Discretionary sector. We rank all the 260 plus industries in the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. To learn more visit: About Zacks Industry Rank.
As a point of reference, the outlook for industries with Zacks Industry Rank #88 and lower is 'Positive,' between #89 and #176 is 'Neutral' and #177 and higher is 'Negative.' The Zacks Industry Rank for Publishing Newspaper is #203.
Analyzing the Zacks Industry Rank, it is apparent that the outlook on the Publishing Newspaper industry is reflecting a Negative view.
The broader Consumer Staples sector portrays an encouraging picture. In the third quarter of 2016, total earnings for the sector are expected to climb 6.5%, while total revenue rising 1.1% year over year. As of Nov 4, 2016, 78.1% of the total number of S&P 500 companies in this sector had reported their results, wherein 76% delivered an earnings beat and about 36% cruised ahead of revenue estimates. While earnings improved 6.7% year over year, revenues inched up 0.7%.
For more details about earnings for this sector and others, please read our ‘ Earnings Trends’ report.
Confidential from Zacks
Beyond this Industry Outlook, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Get the full Report on MNI - FREE
Get the full Report on NYT - FREE
Get the full Report on NEWM - FREE
Get the full Report on GCI - FREE
Get the full Report on SSP - FREE
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.