TSC 21: Is Recovery on the Fall Lineup at Belo?

Thanks to a late-June warning, TV and print media company Belo's (BLC Quote) second-quarter earnings report Friday will feel a lot like a rerun. But what the company says about the fall lineup -- recovery or sluggish economy -- is what Wall Street is tuning in to hear.

Back in late June, Belo warned that second-quarter results would come in lower than year-ago levels, missing Wall Street's estimate of 36 cents a share. Because of this, nearly everyone on Wall Street expects the company to earn 33 cents a share.

"Whatever they said when they preannounced is what I'm looking for," said David Goldsmith, equity analyst at Buckingham Research Group. "It's going to be very mundane."

But while some analysts expect the expected, investors who are buying into cyclical newspaper stocks like Belo on the presumption that the economy will recover in the second half should scrutinize company comments and current trends. While the company didn't give guidance in its first-quarter call, management is very clear with investors about where business stands and may guide earnings if visibility looks good.

"It's an ad-driven business and a lot of people are hoping for a cyclical recovery in newspaper advertising -- that's what we're looking for in Belo," said George Smith, equity analyst at Davenport. "Just signs of a recovery, not necessarily robust improvement."

For the last few years, advertising revenue has recovered from horrid levels only to continue dragging along the bottom. And it is extremely unlikely that Belo will show robust improvement in advertising.

When the company warned on June 24, it said that June revenue trends continued to be weak in the wake of the second Gulf War, similar to April and May. But the company did say that July revenue for its TV unit was stronger than the previous two months, and that July newspaper ad revenue would be stronger as well, with an increase in the low-single digits.