Newspaper stocks are not exactly trendy with investors and traders on the bourses and they can't be faulted for their docile outlook towards the industry. Given the competitive pressure newspapers have been facing from online news providers and the subsequent loss of advertisement revenue, it is natural for investors to stay clear of these stocks. However, there are some exceptions in the industry such as Journal Communications, Inc. (NYSE: JRN) and The McClatchy Company (NYSE: MNI) which have shown tremendous agility to transform themselves.
Wisconsin based Journal Communications, Inc. publishes the Milwaukee Journal Sentinel daily apart from a number of community newspapers in Southeastern Wisconsin. The company also operates 15 television stations and 35 radio stations in 12 states. While majority of revenues are contributed by the broadcasting segment (over 60 percent in the latest quarter) which is a money-spinner as well, things are looking up in the publishing side of business too. In the three months ended September, the revenue decline rate dropped to 3.7 percent, but ongoing efforts to control expenses resulted in a 43 percent jump in operating earnings of the segment. In the same timeframe, advertising revenue was up almost 5 percent. Results of the latest quarter effectively add momentum to the ongoing improvement in operations. Despite a recent run up in stock price (up 27 percent over the last 90 days), it remains attractive at a forward price earnings ratio of 13.1 and a relatively clean balance sheet.
The McClatchy Company is a smaller company than Journal Communications, but focuses completely on publishing and advertising services. As such, its performance is far from stellar in financial terms and by extension, stock performance. The stock has seen mild volatility through the year, but effectively remains available at levels seen a year ago. Thankfully, the company has diversified into online marketplaces - a strategic step that continues to pay dividends and shields the company from the ruthless drop in newspaper publishing. This includes equity stakes in one of the largest online jobs website careerbuilder.com, auto website cars.com, rental website apartments.com, and online real estate website homefinder.com. The slide in revenues is continuing, although the decline rate has dropped considerably now. Cost cutting measures and some strategic sales have propped bottom-line. In the quarter ended September 29, the company reported a net profit of $7.3 million, up from $5.1 million it earned in the same period last year. Although it carries a debt mountain on its balance sheet, a forward price earnings ratio of just 4.5 is a deal saver.