Benchmark Comments On Journal Communications Following Earnings Miss

Journal Communications JRN reported 1Q11 results which fell just shy of expectations. Total revenue of $84 million was $1 million below consensus due to ongoing weakness in Community Newspapers and Shoppers, while Broadcast results were mostly in line. EBITDA fell 25% to $12 million on an anticipated rise in expenses, leading to EPS of $0.05, $0.01 below consensus of $0.06. Publishing revenue fell 6% y/y to $42 million, a slight sequential acceleration from the 5.5% y/y decline witnessed in 4Q10 and below our $43 million estimate. The shortfall was primarily driven by further weakness in Community Newspapers and Shoppers, which saw revenues decline by 8% y/y, including a 21% y/y decline in Classified advertising. Broadcasting revenue declined by 1% y/y to $42 million, matching our estimate. Television revenue fell by 3% y/y, but core advertising rose by 5% y/y excluding the impact of the Olympics in 2010. Auto was a major driver, up 7% y/y. Management did not provide specific guidance, citing that 2Q was expected to come in similar to 1Q with core Broadcasting growth offset by the absence of political and ongoing declines in Publishing. Benchmark has a $$7 PT and Buy rating on JRN JRN closed Tuesday at $5.52