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E.W. Scripps Company (SSP) operates two businesses: newspaper publishing and broadcast television. The company is suffering from a secular decline, exacerbated by a cyclical slowdown.
Ad revenue in the newspaper segment is rapidly decelerating, hurt by the slowing job and real estate markets, and a battered US auto industry. There is no visibility to an upturn. The TV segment is benefiting from accelerating political ad revenue due to recently held November elections. However, the respite was temporary, and in 2009 we anticipate TV ad revenue to decline at a mid-teens rate.
In the meantime, the company is paring its cost structure in line with its reduced revenue stream and shedding under-performing operations, while its very low level of leverage (0.6x debt/2009E EBITDA) is enabling it to return capital to shareholders though buybacks. At just 4.2x 2009E EBITDA, the stock is trading at trough valuations and well below the peer group. Nevertheless, we see few catalysts for appreciation.
Sumit Singh contributed to the report.
Read the full analyst report on SSP
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