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Updated from 12:02 p.m. EDT

Shares of

New York Times

(NYT) - Get New York Times Company Class A Report

were falling Wednesday after the company said third-quarter earnings will fall from last year because of a decline in August newspaper advertising revenue.

The company also said full-year earnings could come in below last year's results. Recently, shares were down $1.88, or 4.2%, at $42.64.

In the third quarter, the company sees earnings of 30 cents to 32 cents a share, including charges. Analysts currently expect 39 cents a share. New York Times earned 38 cents a share in the third quarter last year.

Newspaper group advertising, which includes sales from its New England newspapers and regional newspapers, fell 1.4% in August to $119.7 million. However, including the results of the

International Herald Tribune

, acquired by the company in January, advertising revenue for the newspaper group increased 0.2% to $121.7 million.

Total advertising revenue for the company's flagship paper,

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The New York Times

, fell 3.7% in August to $63.7 million. The company said national advertising revenue decreased as strength in telecommunications, technology products and transportation advertising were offset by weakness in financial services and live entertainment. Retail advertising revenue also fell due to sluggish department store advertising.

"The weak ad environment we saw in July continued throughout August," said Leonard P. Forman, chief financial officer. "Thanks in part to the actions that we have been taking, such as significantly lowering our level of capital spending for the year and decreasing expenses, we are better prepared to confront the slower than expected advertising recovery."

The company said that September advertising revenue has been "trending better." Arts and leisure fall preview advertising revenue rose 28% from last year. Meanwhile, help-wanted advertising has improved at

The Boston Globe

.

"The fourth quarter, which is the largest quarter of the year, will be key to determining the company's annual results," Forman said. The company didn't provide specific guidance, but analysts' estimates are for a profit of 74 cents a share. The company earned 69 cents a share in last year's quarter.

For the full year, New York Times said earnings could fall "slightly below" last year's profit of $1.97 a share. Analysts are calling for $2.03 a share.

The company also reduced its advertising revenue expectations for the year. Newspaper group sales are projected to rise 2% to 4%, lower than the company's original estimate of a 3% to 5% increase. Newspaper group circulation revenue is now expected to climb 2% to 4%, vs. a prior estimate of 3% to 5% growth.

Meanwhile, Blaylock & Partners analyst Edward Atorino believes an upswing in national newspaper advertising began in September, and he upgraded New York Times to buy from hold with a $51 target price.

The analyst predicted that despite the third quarter's expected decline, earnings will turn around in the fourth quarter and be solid into 2004.