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Gannett (GCI) Q4 Earnings Beat Estimates, Decline Y-o-Y

Diversified media conglomerate, Gannett Co., Inc.GCI delivered better-than-expected fourth-quarter 2016 results. The company posted adjusted quarterly earnings of 50 cents a share that beat the Zacks Consensus Estimate of 37 cents but declined 5.7% from 53 cents reported in the year-ago quarter. Higher operating expenses adversely impacted the bottom line.

On a GAAP basis, the company reported earnings of 21 cents a share, up from 17 cents reported in the prior-year quarter.

Gannett reported total revenue of $867 million in the quarter, up 17.3% from the prior-year quarter, and came ahead of the Zacks Consensus Estimate of $847 million.

The increase in revenue came on the back of the buyout of Journal Media Group, Inc., North Jersey Media Group and ReachLocal, and sustained improvement witnessed in national digital advertising revenue. This was partly offset by fall in print advertising and circulation demand.

However, excluding the impact on revenues from buyouts, foreign currency translations and selected exited operations, total revenue declined 7.7% from the year-ago period. Management hinted that national digital advertising revenue soared 19.1%, whereas digital-only subscriptions advanced 71.1%.

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Shares of this McLean, VA-based company were up roughly 8% during pre-market trading hours. However, we noticed that in the past six months, the stock has declined 25.4% compared with the Zacks categorized Publishing-Newspapers industry that fell marginally by 0.7%.

Advertising revenue increased 22.4% to $513.7 million, whereas circulation revenue jumped 15.5% to $297.8 million. Other operating revenue fell 10.6% to $55.5 million.

Adjusted EBITDA inched up 0.5% to $127 million, however, adjusted EBITDA margin contracted 240 basis points to 14.7%.

Segment Details

Publishing revenue came in at $790.4 million, up 7.5% from the prior year quarter. Excluding unfavorable foreign currency translation and selected exited operations, revenue advanced 10.7%. The increase in revenue was driven by incremental revenue from Jersey Media Group and the North Jersey Media Group, 1.4% jump in organic USA TODAY revenue and improved digital performance in local U.S. markets. This was partly offset by a 15.3% decline in print advertising in the U.S. and a 14.2% fall in print advertising in the U.K. Digital advertising revenue increased 14.4% to $110.8 million during the quarter.

ReachLocal segment revenue came in at $75.2 million during the quarter. In the second quarter, Gannett will start introducing ReachLocal in several markets.

Strategic Initiatives

Gannett is realigning its cost structure and streamlining its operations to increase efficiencies and safeguard its earnings and cash flows from dwindling print advertising revenue. It also remains focused on improving its digital business with an aim to lower dependency on soft print media business and traditional advertising. Other publishing companies such as New Media Investment Group Inc. NEWM , The New York Times Company NYT and The McClatchy Company MNI are also trying to adapt to different revenue generating ways.

In sync with this trend, Gannett invested an undisclosed amount in Digg, a digital media company. The company also intends to undertake strategic acquisitions in order to strengthen its position in the newspaper industry.

Gannett acquired Journal Media Group, the owner of the Milwaukee Journal Sentinel and other newspapers. The company recently completed the buyout of leading golf publication, Golfweek. In Jul 2016, Gannett completed the acquisition of North Jersey Media Group Inc., and in August, the company concluded the buyout of digital marketing solutions company ReachLocal, Inc.

Other Financial Aspects

In the quarter, Gannett paid dividends of $18.1 million and bought back 3.75 million shares at an average cost of about $8.71 per share. During the quarter, net cash flow from operating activities was about $53 million and incurred capital expenditures of $15 million, thereby generating free cash flow of approximately $38 million.

Outlook

Gannett envisions mid-single digit growth in reported revenue and a marginal decline in adjusted EBITDA margins.

Gannett currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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