Gannett Company Inc.
), the publisher of one of the largest-selling daily newspapers,
, recently posted second-quarter 2012 earnings of 56 cents a share,
beating the Zacks Consensus Estimate of 53 cents. However, the
quarter's earnings fell 3.4% from last year's 58 cents, reflecting
a slump in publishing advertising demand coupled with a marginal
fall in circulation revenue.
On a reported basis, including one-time items, earnings came in
at 51 cents a share, down 17.7% from 62 cents earned in the
Behind the Headline
Gannett's total revenue inched down 2.1% to $1,307.0 million
from the prior-year quarter, due to a fall in revenue across the
Publishing segment, partially offset by gain at Broadcasting and
Digital segments. Total revenue also fell short of the Zacks
Consensus Estimate of $1,321 million.
The economy, which is still not completely recovered from the
state of hibernation, has been taking its toll on publishing
companies, and Gannett is no exception. Total
revenue tumbled 5.8% to $920.3 million. Publishing advertising
revenue fell 8.1% to $594.3 million from the year-ago quarter,
following a decline of 8.4% in the first quarter of 2012. Tepid
recovery in the economy along with weakness in advertising demand
in the U.S. and U.K. impacted the results.
The downturn in the publishing industry came at the wake of
declining print readership as more readers choose to get free
online news, thereby making the print-advertising model
Publishing circulation revenue inched down 0.6% to $263.9
million. Classified advertising dropped 5.3% during the quarter
under review. Publishing segment operating income slipped 22.6% to
revenue jumped 11.4% to $205.4 million, buoyed by robust
advertising demand and 15.3% revenue surge at Captivate. Television
revenue rose 11.2% to $197.7 million, primarily driven by increased
political and auto related ad demand.
However, excluding cyclical political advertising demand,
television revenue climbed 6.2%. Retransmission revenue increased
17.1% to $22.7 million during the quarter. Broadcasting operating
income grew 17.6% to $94.6 million.
Management now expects total television revenue to rise in the
low-30s percent in the third quarter of 2012 compared with the
prior-year quarter, primarily driven by summer Olympic Games along
with political advertisement.
segment revenue rose 4.5% to $181.3 million due to robust revenue
growth at CareerBuilder. Digital operating income came in at $36.5
million compared with $36.2 million in the year-ago quarter.
Company-wide total digital revenue rose 12.9% to $311.7 million,
driven by higher digital advertising and marketing solutions.
Advertising, which remains a significant source of revenue for
the company, depends upon the global financial health. Gannett is
taking initiatives to diversify its business model, shielding
itself against any economic onslaught by adding new revenue
streams. The company is also adapting to the changing face of the
multi-platform media universe, which currently includes Internet,
mobile, social media networks and outdoor video advertising in its
In an effort to offset the declining revenue and shrinking
market share, publishers are scrambling to slash costs. Gannett has
been realigning its cost structure and streamlining its operations
to increase efficiencies.
To curb shrinking advertising revenue and seek new revenue
avenues, the publishing companies contemplated charging readers for
online content. Despite hiccups in the economy, it still promises
News International, the subsidiary of
) started charging readers for the online content of
The Times of London
Sunday Times of London
from June 2010.
The New York Times Company
) launched a pay-and-read model on March 28, 2011.
Gannett, the publisher of 82 U.S. daily newspapers, lowered its
interest expenses by 19.2% due to lower average debt balances, and
generated net cash flow from operating activities of $154.5 million
and free cash flow of $140.4 million in the quarter. Cash at the
end of the quarter totaled $202.1 million.
The company during the quarter repurchased approximately 3.4
million shares, aggregating $45.5 million. The company has
currently $219 million remaining under its ongoing $300 million
share repurchase program authorized during the first-quarter of
Currently, we maintain our long-term Neutral recommendation on
Gannett. Moreover, the company holds Zacks #3 Rank that translates
into short-term Hold rating.
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