Gannett Co., Inc.
) posted second-quarter 2014 earnings of 67 cents a share that
surpassed the Zacks Consensus Estimate of 63 cents and jumped 15.5%
year over year. The outperformance was prompted by the splendid
performance from its Broadcasting segment, which benefited from the
acquisition of Belo Corp., as well as profitable results at the
Digital segment. The stock rose 4.8% yesterday to close at
Gannett Co , Inc - Earnings Surprise |
Including one-time items, earnings came in at 90 cents a share,
substantially up from 48 cents reported in the prior-year
This Zacks Rank #3 (Hold) stock reported total revenue of $1,460
million, up 12.1% from the prior-year quarter, but short of the
Zacks Consensus Estimate of $1,483 million. Top-line growth
primarily came from improvement in Broadcasting and Digital
revenues, offset in part by a decline in Publishing revenues.
However, had Gannett owned the Belo TV stations in the year-ago
quarter and eliminated results for Captivate and discounting the
impact of the divestiture of Apartments.com, pro-forma revenues
would have increased 1.5%.
Behind the Headline
Gannett stated that the
revenues rose 4.2% to $194.4 million due to robust revenues growth
at CareerBuilder. Digital segment operating income came in at $35.7
million, reflecting an increase of 1.2% from the year-ago
Company-wide pro-forma digital revenues, taking into account the
Digital segment and all digital revenues coming from the other
business segments, grew 6% to $396.9 million. The upside was driven
by revenues gains at CareerBuilder, digital marketing solutions
products and digital advertising.
revenues, which primarily gained from the Belo acquisition, surged
88% to $398.3 million. Further, the company's revenues benefited
from political spending along with a notable rise in retransmission
revenues. Adjusted Broadcasting operating income soared 80.1% to
On a pro-forma basis, Broadcasting segment revenues surged
13.4%, driven 66.6% growth in retransmission revenues and an
increase of 15.2% in digital revenues, partly offset by 2% decline
in core revenues impacted by soft national advertising trends.
Meanwhile, political advertising revenues totaled $16.6 million
compared to $2.8 million in the prior-year quarter.
Management now expects third-quarter 2014 television revenues
growth in the high nineties range considering the current trends
and taking into account the full-quarter contribution from the Belo
stations acquisition. However, on a pro-forma basis, television
revenues is projected to jump in the high teens.
revenues declined 4.1% to $867.4 million, while on a pro-forma
basis it decreased 3.7%. The fall in revenues was due to soft
domestic national advertising, partly offset by an increase in
revenues across digital advertising and marketing solutions.
Publishing Advertising revenues dropped 5.7% to $530.2 million,
while Publishing Circulation revenues slid 0.6% to $277.9 million.
Total Publishing segment's adjusted operating income slipped 10.6%
to $99.6 million.
Pro-forma Publishing segment digital revenues rose 6.9%
attributable to increased digital advertising and marketing
Classified advertising at domestic publishing operations
decreased 4.9% during the quarter under review. Within classified,
softness persisted in all operating categories, namely employment
(down 6.5%), real estate (down 4.7%), automotive (down 3.5%) and
legal (down 3.7%). Retail and national advertising revenues
categories at domestic publishing operations declined 4.7% and
The current economic situation does not look much promising for
publishing companies, which are bearing the brunt of waning
advertising demand, and Gannett, is no exception. However, robust
political advertising demand in the third and fourth quarters would
help the company to capture incremental revenues.
Gannett is taking initiatives to diversify its business model,
shielding itself against any economic onslaught by adding new
revenues 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 portfolio. The company has been also realigning
its cost structure and streamlining its operations to increase
Gannett also initiated a subscription-based model, commenced
Digital Marketing Services in top markets, and refurbished its
iconic brand, USA Today to generate new advertising and marketing
revenues sources. Other publishing companies such as
Journal Communications, Inc.
The New York Times Company
The E.W. Scripps Co.
) are also trying to adapt to different revenues generating
With a view to lower its dependency on soft print media business
as well as traditional advertising and to make itself less
susceptible to economic conditions, Gannett is making endeavors to
expand its presence in broadcasting and digital products. The
recent acquisition of six television stations of London
Broadcasting Company underscores the same. Prior to this, the
company acquired television-station operator, Belo Corp. We believe
this will transform Gannett's business model, which was largely
focused on low margin newspapers to a high-margin multi-media
Other Financial Aspects
Gannett ended the quarter with total cash of $430.7 million and
long-term debt of $3.45 billion.
The company generated net cash flow from operating activities of
$188.9 million and free cash flow of $307.1 million in the quarter.
The company, during the reported quarter, repurchased approximately
1.4 million shares aggregating $37.9 million.
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