Tribune’s third quarter earnings fall less than analysts expected

Tribune Co. reported that its third quarter earnings declined, though not as much as analysts expected, as the media company reaped the benefits of lower printing costs and layoffs in its publishing arm and enjoyed moderate revenue growth in its television and broadcast properties.

Earnings excluding profit from five non-operating items and the sale of various publishing holdings totaled 38 cents per share, compared with analysts' estimates compiled by Bloomberg LP of 26 cents.

Tribune shares jumped 63 cents, or more than 2 percent, to close at $28.15 Wednesday.

Net income fell 6 percent to $152.8 million, or $1.22 per diluted share, in the quarter ended Sept. 30, compared with $164.3 million, or 65 cents per diluted share, on fewer shares in the year-earlier period.

Analysts said...

"They had a significantly better cost experience than I thought they would," said James C. Goss, securities analyst with Barrington Research Associates Inc. in Chicago. Although the company's broadcast and television divisions performed well, cutting "the cost in the publishing area was bigger," Goss said.

The company posted revenues of $1.28 billion, down 4.1 percent from $1.33 billion in the year-earlier period. But broadcast and entertainment operating revenues rose 3 percent to $406 million in the third quarter from $393 million in the same period a year ago.

First good news in a while...

The fact that the earnings decline was not as bad as analysts predicted represents a bit of welcome news for the Tribune. The company's planned takeover by real estate magnate Sam Zell has been overshadowed by doubts pertaining to financing issues stemming from the recent woes in the housing market as well as pending changes in Federal Communications Commission regulation.

Tribune has petitioned the FCC to grant it waivers for its operation of both a newspaper and a broadcast station within in five separate markets, arrangements that violate the FCC ban on cross-media ownership.

"It couldn't help the process, but it could have hurt the process," Goss said of the earnings report. "The biggest impediment in getting the deal closed is getting the FCC waivers," he said.

Goss upgraded the stock on Tuesday to "market perform" from "underperform." Should Zell's buyout and planned privatization of Tribune go through in the coming months, investor returns on today's share price could prove handsome, Goss said. Tribune shares have traded below Zell's offering price of $34 for more than a year.

Propping up the stock...

Without the impending sale of the company to Zell, a fair share price would be closer to $7.00 or $8.00 per share, according to a report issued in early October by Craig A. Huber, a securities analyst at Lehman Brothers Equity Research in New York.

For the first nine months of 2007, net income fell 53 percent to $165.7 million, or 88 cents per diluted share, from $354.9 million, or $1.22 per diluted share, in the year-earlier period. The company posted year to date sales of $3.8 billion, down 5 percent from $4.0 billion in the year-earlier period.