Gannett Co., Inc.
) first-quarter 2014 results remained impressive, as the bottom
line beat the Zacks Consensus Estimate and surged 27% year over
year, buoyed by sturdy performance of the Broadcasting segment that
gained from the acquisition of Belo Corp. This is the third
straight quarter that the company has outdone the Zacks Consensus
Estimate. Notably, the top line registered 13.4% growth but missed
the Zacks Consensus Estimate. The Digital segment also favorably
impacted the quarter.
However, soft advertising demand has been weighing on Gannett's
performance. Advertising, which remains a significant source of
revenue, is largely dependent upon the global financial health. We
observe that publishing advertising revenue fell 4.8% during the
quarter. Other publishing companies such as
Journal Communications, Inc.
The New York Times Company
) are also encountering a similar setback.
Advertisers are shying away from making any upfront commitments
in an economy that is showing tepid recovery. As a result, Gannett
is taking initiatives to diversify its business model by adding new
revenue streams in an effort to make it less susceptible to
unfavorable economic conditions.
The company is also adapting to the changing face of the
multiplatform media universe, which currently includes Internet,
mobile, tablet, social media networks and outdoor video advertising
in its portfolio. This is evident from the company's acquisition of
the television-station operator, Belo Corp. This deal is a perfect
fit for the company as it is expected to transform Gannett's
business model, by shifting its focus from low-margin newspapers to
the high-margin multi-media business. The acquisition of 6
television stations of London Broadcasting Company underscores the
company's step toward the same.
Gannett 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 revenue
Cost containment is one of the aggressive approaches undertaken
by publishing companies to keep bottom-line growth intact amid
declining revenue and a shrinking market share, and Gannett is no
exception. The company has been realigning its cost structure and
streamlining its operations to increase efficiencies, and in turn,
its operating performance.
Gannett currently carries Zacks Rank #3 (Hold).
Stock Worth Considering
A stock worth considering in the publishing sector is
The E.W. Scripps Company
) sporting a Zacks Rank #1 (Strong Buy).
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