Magazine article Editor & Publisher

Top Analyst: Newspapers Will Rebound -- but Not 'Till 2012

Magazine article Editor & Publisher

Top Analyst: Newspapers Will Rebound -- but Not 'Till 2012

Article excerpt

Wall Street analyst Paul Ginocchio says big metro newspapers will bounce back -- but not until 2012.

And the Deutsche Bank Securities analyst warns that when earnings do turn positive again, they'll be in margins far below the levels newspapers got used to in the 1990s.

Those high margins should be seen as anomalies, Ginocchio told the Inland Press Association at its annual meeting in Chicago earlier this week. Margins were high then mostly as a result of massive consolidation of metros as the number of two-newspaper cities fell precipitously.

"We never had margins like that before -- and they're not coming back," he said.

When EBITDA (earnings before interest, taxes, deductions, and amortization) does turn positive in 2012 Deutsche Bank estimates, the margins will be at 17.7%. EBITDA margins last year were 25% by Deutsche Bank's reckoning, and they will slip to 21.2% this year, 18.7% in 2008, and to 17.9% in 2009 before they stabilize at 17.7%.

For all the talk about Wall Street's interest in margins, Ginocchio told Inland, analysts and investors actually prefer to see top-line growth rather than higher margins on smaller growth.

Deutsche Bank, he added, is now "less bearish on the fundamentals" of the industry than it was earlier this year. "There are some people who believe in the future of newspapers -- I'm one of them," Ginocchio said.

Before newspapers reach that 2012 "inflection point," however, there will be plenty of pain ahead. …

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