Scripps stock punished after guidance

'No plan to sell, spin off newspaper division'

NEW YORK -- Shares of media firm E.W. Scripps Co. took a beating Tuesday after management provided weaker-than-expected financial guidance for its current first quarter partly because of sluggish newspaper trends and said it has no plans to sell or spin off its newspaper unit despite recent speculation that Scripps will focus on its fast-growing TV assets.

The news overshadowed what analysts called a solid fourth-quarter profit that reversed a year-ago loss thanks in part to strong political advertising revenue.

Scripps has "no plan to sell, spin off or separate the newspaper division," president and CEO Kenneth Lowe said Tuesday. Management had told an investor conference this month that they have at least looked at such a move, arguing that newspaper weakness has held Scripps back.

But Lowe said that his team routinely considers changes to its portfolio of assets as part of doing business, signaling that investors had maybe gotten ahead of themselves.

Scripps led Tuesday's decliners on The Hollywood Reporter's Showbiz 50 stock index, closing down 5.1% at $49.51.

Scripps on Tuesday reported a fourth-quarter profit of $133.9 million, compared with a loss of $603,000 a year ago when the firm took a goodwill write-down for the Shop At Home network, which it sold last year. When excluding Shop At Home results from last year's financials and focusing on continuing operations, Scripps' profit rose from $98.8 million to $132.4 million.

A lower tax rate also helped boost the latest quarterly earnings, the company said.

Revenue jumped 11% year-over-year to $683 million, driven by a 25% increase at the firm's TV station group to $112 million and a 13% improvement at the Scripps Networks cable networks unit.

The divisions boosted their profits 64% to $49.1 million and 19% to $144 million, respectively.

Scripps Interactive Media, which includes comparison shopping services Shopzilla and recently acquired uSwitch, posted a fourth-quarter profit of $28.3 million on revenue of $86.6 million. Had the firm already owned uSwitch in the year-ago period, interactive unit revenue growth would have amounted to 21%.

Scripps said it expects first-quarter revenue for Scripps Networks to rise 10%-12%, TV revenue to decline 7%-10% and newspaper revenue to fall 5%-7%. For the full year, the newspaper unit should see a low-single-digit percentage decline, management said.

"Scripps posted strong fourth-quarter earnings, but offered disappointing first-quarter guidance," Goldman Sachs analyst Peter Appert said in a research note.

Joseph NeCastro, executive vp finance and administration, told investors Tuesday that Scripps will see a back-end loaded 2007, meaning growth will be stronger in the second half.

Asked why the first-quarter guidance for Scripps Networks wasn't higher, he said ratings are up in the high-single-digits, and Scripps also is reinvesting money into promoting its networks.

Broadcast advertising scatter market prices are about 20% above upfront levels, but only 2%-4% higher than at the same time a year ago, executives said.
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