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Goldman Sachs: Newsprint Price to Jump 30%, Take Hit on Newspaper Earnings

Magazine article Editor & Publisher

Goldman Sachs: Newsprint Price to Jump 30%, Take Hit on Newspaper Earnings

Article excerpt

Newsprint prices will jump 30% in the second half of 2008, shaving the earnings-per-share (EPS) of public newspaper companies an average 2.1% -- but clobbering A.H. Belo Corp.'s EPS, Goldman Sachs predicts in a report released Wednesday.

Newsprint companies -- which traditionally have lowered prices when, as now, newspapers reduce consumption in slow times -- will be able to make these prices stick, the Goldman Sachs Paper & Forest Products research team predicts.

"Who said the tough environment facing publishers couldn't get tougher?" wrote analysts Peter P. Appert and Peter M. Salkowski. "Historically, newsprint prices have fallen during periods of weak ad demand, providing a bit of a cushion to publishers' earnings. The current cycle is proving different based on consolidation within the newsprint industry, which is allowing producers to sharply reduce output, meaningfully increasing the pricing power of producers. Unfortunately for publishers, this new pricing dynamic is likely to remain in place through 2009. …

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