Media/Entertainment
Publisher Knight RidderKRI will badly miss third-quarter earnings estimates because of rising raw material costs and a sluggish advertising market, particularly in the automotive sector. The company sees third-quarter earnings from continuing operations of about 65 cents a share, well short of the Thomson First Call consensus estimate of 89 cents. The updated guidance reflects a 20% decline from Knight Ridder's year-ago continuing-operations number of 81 cents a share, excluding a gain. A 9.1% year-over-year increase in newsprint costs is driving the decline. Meanwhile, total advertising in August is up just 1.2% from August 2004, as solid gains in help wanted and real estate were mostly offset by a 9.5% decline in automotive advertising. "The month was disappointing," said CEO Tony Ridder. "Although recruitment and real estate have remained strong all year, we did not see the hoped-for turnaround in auto in August (I think we will see some turnaround in September). "National's growth, held back by ongoing softness in travel and entertainment, is still modest (national auto also was down). And retail, which had been running up 2.6% for the year through July, declined," Ridder said. The company also cited a higher interest expense, losses from Hurricane Katrina, plant depreciation and difficult comparisons with "particularly good health costs in last year's third quarter." For the fourth quarter, Knight Ridder sees earnings rising due to less cost volatility and the contribution from earnings at three newly acquired newspapers. The stock closed at $64.90 on Monday.
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