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. Last Updated: 07/27/2016

U.S. Newspaper Earnings Leave Wall Street Stunned

NEW YORK -- Wall Street is getting the news. Six months into the 21st Century that was meant to toll the death knell for newspapers, the word is: Don't shoot the messengers, yet.

All major U.S. newspaper publishers, except one, have reported stronger earnings for the second quarter, confounding financial experts who predicted "daily rags" wouldn't even survive the challenge of radio and television, let alone the ubiquitous Internet.

The view on the street Monday was that USA Today, The New York Times, The Los Angeles Times, The Boston Globe, The Chicago Tribune, The Wall Street Journal and scores of newspapers in small-town America are doing very well, thank you. Revenue from advertising is more than making up for a slow decline in circulation and a rise in newsprint prices that has eaten into profits.

"They are beating [financial] expectations across the board," said Ed Atorino, a newspaper industry analyst at Wasserstein Perella Securities. "I thought second-quarter expectations were pretty conservative, but ad growth is strong nationally and classified [advertising] has held up better than Wall Street expected.

"Fear of the Internet is turning out to be totally far-fetched," he said. "There are more pluses than minuses for newspapers."

He pointed to Monday's figures from Knight Ridder Inc., the No. 2 U.S. newspaper chain, which publishes 32 daily newspapers with a daily readershipof 8.7 million and 12.9 million on Sundays.

Second-quarter earnings bea t Wall Street estimates, with advertising revenues continuing to fuel growth as the company expands onto the Internet. Excluding special one-time items, earnings rose to $1.02 per share from 83 cents in the year-ago period. Analysts polled by First Call/Thomson Financial had expected earnings of 95 cents per share.

"Just look at Knight Ridder's numbers: they had $6 million in ads and $16 million from telecoms. So new media is spending lots of money in traditional media, and newspapers are benefiting," said Atorino.

Leland Westerfield of PaineWebber was similarly upbeat: "It also sets the stage for newspapers to prove themselves online as well as in print," he said, referring to the move most major newspapers have made to put their news on the Internet as well as on the printed page.

In fact, the one exception to the robust newspaper earnings picture was the Washington Post Co., whose second-quarter profit fell primarily because it has spent heavily on building up new Internet-based businesses.