Washington Post: Power Play?

Shareholders of Washington Post Co. have been getting some good news lately. Although earnings are down, the stock has been rebounding, from 195 at the beginning of the year to 241 on Mar. 6. Its all-time high was 311, back in 1989.

Like most news publications, The Washington Post, which is the largest-circulation paper in the nation's capital, has been hurt by crimped advertising. Management has warned that earnings will be off in 1991, on top of an 11.8% profit drop last year.

No matter, say some big-money investors. They insist that the company is a timely buy in an economic slump. "Even after the stock's recent surge, it still offers longer-term appeal," says Steve Leeb, editor of market letter Personal Finance.

The folks at RD13D Research are also high on Washington Post Co. They note that the company owns four TV stations and 50 cable systems in 15 states, many of which are leaders in fast-growth markets. "The company has one of the strongest balance sheets in the industry," says a 13D analyst. "Its core businesses generate $30 million to $70 million of free cash flow annually even in economic slumps."

Leeb points out that the Washington (D. C.) market has historically led the U. S. out of recessions. So chances are high that the The Washington Post's turnaround will come much earlier than those of newspapers elsewhere. Leeb notes that the company's earnings ballooned right after the 1981-82 recession.

He believes profits will accelerate in 1992 and 1993. He sees the company earning $15 a share in 1991, $17 in 1992, and $20 in 1993. Since its p-e has climbed as high as 27 in the past five years, Leeb thinks the shares could easily sell at a p-e of 20. That means the stock would hit $400 a share by 1993, according to Leeb's forecast.

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