The New York Times Co. posted a 48 percent decline in fourth-quarter net income. According to the Wall Street Journal, ad revenue fell 18 percent at the company’s News Media Group, which includes the New York Times, The Boston Globe, The International Herald Tribune and 16 other papers.
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NEW YORK (Dow Jones)–New York Times Co. (NYT) said Wednesday its fourth-quarter net income plummeted 48% because of sharp declines in ad revenue; however, shares of the newspaper publisher rose as the results beat expectations on Wall Street.
The publisher of The New York Times and The Boston Globe also confirmed that it hired banking firm Goldman Sachs to explore a sale of its 18% stake in New England Sports Ventures LLC, owner of baseball’s Boston Red Sox and Fenway Park as well as 80% of New England Sports Network.
New York Times reported fourth-quarter net income of $27.7 million, or 19 cents a share, down from year-earlier earnings of $53 million, or 37 cents a share. The latest results included a charge of 10 cents a share related to severance costs and a write-down of 7 cents a share on the International Herald Tribune.
The publisher’s total revenue fell 11% to $772.1 million, as ad revenue dropped 18%.
Analysts surveyed by Thomson Reuters were expecting earnings of 27 cents a share on revenue of $766 million.
“Taken all together, these results were better than expected,” said Edward Atorino, an analyst with Benchmark Co. “Their performance, particularly on the cost side, was relatively decent given how horrendous the environment for newspapers is right now.”
Shares of New York Times recently rose 5.5% to $5.91. The rally Wednesday comes after the publisher’s stock has declined by 18% so far this year following a 63% drop last year and a 88% drop over the last five years.
Overall, the embattled media sector staged a strong rally Wednesday, offering hope that recent stock declines have accounted for the extent of the advertising slump that’s in store for the industry. Shares of News Corp. (NWS) jumped 10% to $8.22; CBS Corp. (CBS) shares added 7.3% to $6.58; Walt Disney Co. (DIS) shares rose 5.4% to $22.39; and Gannett Co. (GCI) gained 4.7% to $7.37.
Like most newspaper publishers, the New York Times has been hit hard by credit concerns amid the global financial crisis and economic downturn after struggling for years with circulation and revenue declines due to the rise of the Internet. Moody’s Investors Service recently slashed its credit rating on the publisher into junk territory, following a similar action by Standard & Poor’s
J.P. Morgan analyst Alexia Quadrani said the publisher’s better-than-expected performance in the fourth quarter was fueling the rise in its stock price on Wednesday, along with further reassurances that the company is being aggressive about shoring up its financial position to survive the economic downturn.
“The efforts to raise liquidity makes people feel they’re trying to be realistic in addressing the challenging situation they’re in,” Quadrani said.
It’s unclear at this point whether there are any interested buyers in the company’s stake in NESV. New York Times acquired the asset in February 2002. It has been valued at roughly $200 million, but the economic downturn may force the publisher to sell it at a discount.
“It’s a unique asset, and investors are more likely to be interested in that than a newspaper right now,” Quadrani said.
The company is also raising $225 million in a sale-leaseback deal with W.P. Carey & Co. (WPC) for a portion of its Manhattan headquarters. It recently raised $250 million in a financing deal with Mexican billionaire Carlos Slim, and it cut its dividend by 75% in November, reducing the annual payout to its controlling family – the Ochs-Sulzbergers – to less than $7 million from about $25 million.
These moves have allayed concerns about the New York Times’ near-term financial obligations, but its long-term prospects remain challenged. At the end of the quarter, it had $57 million in cash and $1.1 billion in debt, while equity market declines in 2008 have left it with an underfunded pension obligation of $625 million that it will begin paying next year. Meanwhile, its revenue declines continued in the fourth quarter, and the company warned they could worsen this year.
New York Times’ advertising revenue fell 17.6% for the quarter from the year-earlier period. Ad revenue at the news media group, which includes its newspapers, fell 18.4%. Online revenue, which has been viewed as a category that can power the company in a digital future, was down 2.9%.
After increasing almost 15% in the first nine months of the year, digital advertising was down 3.5% in the fourth quarter as online marketers cut back on display ads amid the broader advertising slump.
New York Times said it will stop reporting monthly revenue results – a step that has already been taken by most major U.S. newspaper publishers, including Gannett. New York Times Chief Financial Officer James Follo said on a conference call following the release that the decision to end monthly reporting “is consistent with our focus on managing our business for the long term.”
Meanwhile, the publisher’s operating costs fell 8.5%, while newsprint expenses rose 11% due to a 33% rise in prices. The added expense was partly offset by a 22% decrease in newsprint consumption by the company. Follo said that newsprint prices peaked in November and that forecasters expect them to decrease this year as demand dwindles amid the economic downturn.
“As we look ahead, we believe advertisers will continue to be cautious with their budgets, particularly in the early part of this year,” New York Times Chief Executive Janet Robinson said in a statement. “To date in January the rate of decline in print advertising revenue has accelerated from what we saw in December, while that of digital is similar to last month.”