Primedia Posts Results Above Estimates

J.P Morgan is maintaining its Neutral rating on Primedia PRM shares. Q3,10 results were above JPM's estimates with revenues -7% and EBITDA -2%. Cost control remains tight—down 9% YoY in Q3. JPM continues to like PRM's strategy to bolster online and digital offerings. And its impressed by the company's steady gains in client count over the past year-plus—that could have important implications for PRM's growth when/if end-market conditions strengthen. Competitive pricing pressure remains an issue in certain markets, but PRM believes its morphing product offerings are helping it differentiate from traditional peers. Valuation remains intriguing at 6.1 times 2011E EBITDA. But its waiting for some signs of top-line improvement at the flagship Apartment Guides unit. Risks to the target price include advertising revenues could miss our expectations. Primedia generates over 80% of revenues via advertising. New Homes Guides results have deteriorated in recent quarters. Also, If results weaken considerably, then PRM could be forced to cut its dividend. If business conditions worsened considerably, then the company could tweak its dividend policy to free up cash. However, we don't think this is likely near term. JPM has a Neutral rating on PRM PRM closed Tuesday at $3.83