A sharp slowdown in political advertising spending, coupled with an uneasiness in the economy, hurt the third-quarter performance of four newspaper groups that own television stations, though the declines in some cases were offset by strong results in the companies’ other divisions.
As the earnings season began last week with financial results from Gannett, Tribune, E.W. Scripps and The New York Times, Wall Street braced for reports that were expected to show declines in broadcast revenue and profit, thanks in large part to tough comparisons with the 2002 third quarter, when congressional and other campaigns helped many stations attract significant advertising dollars.
The analysts weren’t disappointed. With the exception of Tribune, which reported gains in its television division thanks to robust local advertising, the companies that reported last week all saw their television operations produce single-digit percentage declines in revenue due to the absence of significant political spending. More significant declines are expected in the fourth quarter, given the big political spending that took place in October 2002.
However, executives and Wall Street analysts are projecting a more robust 2004, given the presidential election, an improving economy and NBC’s coverage of the Summer Olympics in Athens in August.
Gannett, which owns 22 TV stations, is particularly well positioned to take advantage of the improved conditions, said SG Cowen analyst James Marsh. “We expect investors to start looking past 4Q and into 2004, when Gannett stands to benefit from political advertising and the Olympics on its NBC stations,” he wrote in a research note.
Among the highlights from the quarter:
* Gannett reported that broadcast TV revenue fell more than 6 percent to $173.2 million for the period, while operating income dropped 11 percent to $72.6 million and operating cash flow sank 10 percent to $79.3 million, a direct result of a sharp decline in political advertising, which totaled $21 million a year ago. However, strong results at Gannett’s newspaper division helped the company post a 5 percent rise in third-quarter profit to $279 million, or $1.03 a share, from a year-earlier profit of $265.6 million, or 99 cents a share.
* Tribune, which owns 26 TV stations and holds a stake in both the Food Network, said its broadcasting and entertainment division reported a 6.5 percent rise in revenues to $419 million, while operating profit fell 2.1 percent to $134 million. Within that division, Tribune’s television stations posted a 5.4 percent increase in revenue to $327 million, while expenses climbed nearly 10 percent, due in part to the impact of the acquisition of two stations, one in St. Louis and one in Portland, Ore.
Those numbers contributed to the company’s overall 3.4 percent increase in revenue to $1.4 billion, while profit for the quarter sank 23 percent to $182.3 million, or 56 cents a share, from a year-earlier level of $236.8 million, or 76 cents a share.
* Scripps’ broadcast TV unit, which owns 10 TV stations, reported a nearly 1 percent decline in revenue to $72.3 million, since the tumble in political advertising was offset by stronger local and national advertising revenue. Operating profit fell 9 percent to $18.7 million.
Scripps produced better results at its Scripps Networks unit, which controls cable channels Food Network, Home & Garden Television, Fine Living and DIY-Do It Yourself Network. Profits at the division surged 35 percent to $40.3 million, while advertising revenue soared 29 percent to $96.6 million and affiliate fee revenue climbed 12 percent to $23.5 million.
The company also reported a pro forma 10 percent revenue jump to 58.4 million at its Shop at Home Network, which Scripps acquired in October 2002. Those results led Scripps to report a 24 percent rise in overall revenues to $440.5 million, while the company’s profit climbed 13.5 percent to $51.9 million, or 64 cents a share.
* The New York Times’ eight-station group reported a 6.4 percent decline in third-quarter profit to $34.8 million, while operating profit tumbled nearly 30 percent to $7.5 million, largely attributable to a steep decline in political advertising spending in the quarter, which came in at $1.6 million vs. $5.8 million a year ago.