Tribune Faces New Test

The outlook remains inky for big newspaper companies.

Tribune (TRB), Gannett(GCI) and McClatchy (MNI) have been much in the news of late, what with investor discontent swirling. Shares of newspaper companies have fallen sharply in recent years in the face of shrinking growth prospects.

This week the companies will get a chance to show that the reported death of the newspaper business has been exaggerated. Still, analysts aren't holding their breath.

Analysts are looking for Gannett, which is due to report Wednesday morning, to earn $1.31 per share, down from $1.37 a year ago, on $2 billion in revenue. On Thursday, Tribune will be expected to earn 56 cents per share, down from 60 cents last year, on $1.5 billion in revenue. McClatchy targets are set at 88 cents a share, down from 94 cents last year, on $338 million in revenue.

Wall Street will focus most of all on Tribune, given the turmoil at the Chicago company.

The Chicago Cubs owner, which has large TV station and newspaper holdings, including the Los Angeles Times, has just completed a large tender offer even as a key stakeholder is calling for a split of the company. Deep-pocketed prospective buyers of the Times, including reported interest from the likes of David Geffen and Ron Burkle, have emerged, but Tribune management says it isn't selling.

Tribune just completed a $2 billion Dutch auction through which it bought back 15% of outstanding stock at $32.50 per share. The program was derided by 12% owner the Chandler family trusts, which is applying pressure on management for a full scale break-up of operations.

To be sure, more investors are beginning to question the logic of owning disparate local media holdings. These skeptics believe cross-media ownership synergies have largely failed to materialize.