Journal Communications Inc.‘s stock, traded on the New York Stock Exchange under the ticker symbol JRN, fell below $1 per share in late February. It reached a low point of 39 cents per share on March 11.
Daniel Leben, an analyst with Milwaukee-based Robert W. Baird & Co. Inc. who follows media companies, estimated JRN’s stock price target to be about $2 in mid-February. Craig Huber, an analyst with New York-based Barclays Capital, placed a 12-month target of $1 for JRN stock on Feb. 23.
Industry experts don’t expect much positive news any time soon from Journal Communications or other newspaper companies.
“In terms of the newspaper industry, we are not expecting to see any turnaround in the middle of the year,” said Ken Doctor, an analyst with Outsell Inc., a research and advisory firm to the publishing, information and education industries with offices in California and London. “The problems of the industry are deep and have been exasperated by the recession. There is no turnaround in sight, and the freefall in stock is near universal.”
During “normal” market conditions, Journal Communications would be at risk of delisting notices from the New York Stock Exchange. The NYSE typically requires listed companies to have a share price of more than $1 and at least $25 million in market capitalization.
However, the NYSE has temporarily suspended those limits because of the recession.
“The New York Stock Exchange has always been very particular about companies meeting their listing requirements,” said William McGinnis, a certified financial analyst in Milwaukee who frequently serves as an expert witness in national and international securities and investments cases. “In normal times, if a company’s stock stayed below $1 per share, you would expect delisting warnings, and if that wasn’t resolved, an eventual delisting.”
The NYSE’s temporary rule adjustment for stock prices is set to expire on June 30, and McGinnis said he believed the exchange might be extended if economic conditions have not improved.
“Pragmatically, they (the exchange) don’t want to delist these companies,” he said. “If these were normal times, Journal Communications could easily expect a delisting warning. But these aren’t normal times.”
However, John Morton, a media analyst with Maryland-based Morton Research Inc., said he does not believe that Journal Communication’s stock price will rise above $1 before the end of June.
“That’s going to depend on there being at least some kind of recovery in the newspaper business, and I don’t think that is going to happen this year,” Morton said.
Journal Communications had about $583 million in annual revenue for 2007 and approximately $545 million in 2008. Leben estimates that the company will have $450 million in revenue in 2009. Huber estimates about $447 million for the company this year.
Journal Communications is set to announce its first quarter earnings on April 22.
The newspaper industry and JRN will likely see approximately 20-percent declines in revenue for the first quarter, Doctor said, which will likely be about the same in the second quarter.
“Nobody knows what will happen with the recovery (of the economy),” Doctor said. “The only hope for newspapers is that the fourth quarter (advertising revenue) comes back with some sort of reasonable holiday season.”
The deflation of newspaper stock prices shows that Wall Street investors do not believe that these companies have viable plans to become or remain profitable, said Edward Atorino, a media analyst with The Benchmark Company LLC, a New York broker-dealer. Many newspaper companies made numerous acquisitions in recent years, and recent revenue shortfalls have made their debt loads more severe.
“If you look at the stock market as a predictor, it is predicting that (JRN and other companies) will be in default and will have to reorganize, which could make their equities worth even less,” Atorino said.
The next step for Journal Communications may be bankruptcy, Atorino said, noting that Chicago-based Tribune Co. filed for chapter 11 bankruptcy protection in December.
“The market is saying that’s inevitable (for Journal Communications),” Atorino said. “Unfortunately, the industry trends are so negative that investors have given up on the equity value of the companies.”
