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Accordingly, for fiscal year 2007, the New York-based publisher and distributor of consumer guides now forecasts revenue growth of flat to low single digits compared to its previous outlook of low single-digit percentage revenue growth. Two analysts polled by First Call/Thomson Financial expect the company to report revenues of $325.49 million for the year.
Primedia said that it anticipates full-year adjusted EBITDA, or earnings before interest, taxes, depreciation, amortization, non-cash compensation and providing for restructuring costs, to be approximately flat compared to the prior year. Previously, the company forecast mid-single digit percentage growth for full-year segment EBITDA. Adjusted EBITDA was formerly referred to as Consumer Guides Segment EBITDA.
The company estimates its largest business, Apartment Guide and ApartmentGuide.com, will continue to deliver sequential quarterly revenue growth in 2007, while revenue for the full year is expected to exceed original expectations. However, the company said it continues to expect full-year revenues for the business to decline from a year ago.
In addition, the company said that it continues to expect full-year revenue growth across all of its other businesses, except Auto Guide, as compared to the prior year. However, the revenue growth is expected to be at a slower rate than originally expected.
Primedia attributed the slower rate of revenue growth for the full year to a decrease in advertising spends by many new home builders, particularly with developments located in Midwest and Northeast markets. These builders are attempting to address the difficult mortgage environment, declining home prices and high inventory levels, the company noted. In addition, delays in filling vacancies in the company's rentals.com sales force and scaling back or ceasing of operations by DistribuTech customers who publish within the resale home sector also contributed to the slower rate of revenue growth, the company said. The company does not own resale home publications.
The company estimates an increase in expenses for fiscal year 2007 to exceed original expectations due to investments made to expand its proprietary network by about 2,000 retail locations and extend its relationship with a national grocery chain. The increase in expenses is also due to the company's need to staff fully its Apartment Guide and Renatals.com sales forces and increased targeted marketing expenditures. However, the expenses are expected to be offset partially by company-wide cost cutting initiatives, the company said.
Primedia said that it would release its financial results for the third quarter on November 6, 2007. Analysts expect the company to report net loss of $0.07 per share on revenues of $81.76 million for the quarter.
Last month, Deutsche Bank downgraded its rating on shares of Primedia to "Hold" from "Buy", while raising its price target to $15.50 from $14. Despite the downgrade, analyst Paul Ginocchio's belief has not changed that Apartment Guides should benefit as the total number of apartment units rises along with the vacancy rate as the fallout from the housing bubble continues. In fact, the business unit achieved quarter-over-quarter revenue growth in second quarter for the first time in two years, showing that trends in rental housing advertising have begun to favor Primedia.
In August, Primedia reported a net income for the second quarter of $7.6 million or $0.03 per share compared to net loss of $2.1 million or $0.01 per share in the prior-year quarter. Net revenues for the quarter increased to $81.6 million from $81.3 million in the previous-year quarter.
Among the company's peers, New York-based The McGraw-Hill Companies Inc. (MHP | charts | news | PowerRating) said last month that it still expects to achieve double-digit earnings growth in 2007. Analysts expect the company to earn $3.01 per share for the year.
While speaking at Goldman Sachs' Communacopia XVI 2007 conference, McGraw-Hill companies' chairman, president and chief executive officer, Harold McGraw III, said the company is confirming its earnings outlook for the year, though the rate of growth is expected to slow during the second half of the year.
In Monday's regular trading session, PRM is currently trading at $11.63, down $1.58 or 11.96% on a volume of 195,000 shares. In the 52-week period, the stock has been trading in a range of $8.88-$20.40.
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