News Corp (NWSA), Gannett Co., Inc. (GCI), Reed Elsevier NV (ADR) (ENL): One Publisher to Buy and Two to Sell

Reed Elsevier is a diamond in the rough

Reed Elsevier NV (ADR) (NYSE:ENL) is largely invested in publishing, but the firm looks to have more solid footing than News Corp (NASDAQ:NWSA) and Gannett Co., Inc. (NYSE:GCI) due to the niches in which it operates. These include science, medical and technology publishing units. Due to the specific nature of the information that is carried in these units, I think that advertisers relevant to those areas will still want to buy ads with the company due to the readers that will keep coming back for credible information.

While the medical publications essentially have a monopoly through its “Gray’s Anatomy” medical reference books, the legal information the company provides does have a competitor in Thomson Reuters. Together the companies have an estimate 80% market share in that segment, providing some level of security.

Analysts also like this economic moat. They anticipate that the company will increase its earnings per share by 67.5% this year and 9.5% next year. However, only one analysts is covering this company according to Yahoo! Finance. This year’s expectation is lofty, and if the company posts substantial gains but misses estimates then look out below.

Hope is still alive

If publishers are able to get a lock on earning online revenue, these operations could turn around. I don’t believe there is a chance that the firms will achieve the type of revenue they accomplished when print publishers were more relevant, however. This is due to the extreme ease with which competitors can attract advertising revenue online. The firms are in a rebuilding phase, and they will need to find a way to develop their brands online — but without being able to create an economic moat on that platform, the chances are slim.

The article One Publisher to Buy and Two to Sell originally appeared on Fool.com and is written by Phillip Woolgar.

Phillip Woolgar has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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