Gannett Company: Earnings Preview

| About: Gannett Co., (GCI)

Gannett Company, Inc. (NYSE:GCI), the publisher of one of the largest-selling daily newspapers in the nation, USA Today, and an S&P 500 company, is scheduled to report its fourth-quarter 2011 financial results before the opening bell on Monday, January 30, 2012. The current Zacks Consensus Estimate for the quarter is 69 cents a share. The Zacks Consensus estimates revenue at $1,394 million for the fourth quarter.

Recap of Third-Quarter 2011

On October 17, 2011, Gannett delivered third-quarter 2011 results. The quarterly earnings of 44 cents a share missed the Zacks Consensus Estimate by a penny, and dropped 15.4% from last year's 52 cents, reflecting a slump in publishing and political advertising demand as well as a marginal fall in circulation revenue. However, effective cost management provided some cushion to the bottom-line.

Gannett's total revenue dropped 3.5% to $1,266 million from the prior-year quarter due to fall in revenue across Publishing and Broadcasting segments, partially offset by gain at Digital segment. Total revenue also fell short of the Zacks Consensus Estimate of $1,271 million.

Zacks Consensus Projection for Fourth Quarter

The analysts surveyed by Zacks, expect Gannett to post fourth-quarter 2011 earnings of 69 cents a share. The current Zacks Consensus Estimate portrays a decline of 16.9% from 83 cents a share earned in the year-ago quarter. The current Zacks Consensus Estimate for the quarter range from a low of 65 cents to a high of 72 cents.

Zacks Agreement & Magnitude

Of the eight analysts following the stock, only one analyst has revised the estimate upwards in the last 30 days, having no material impact on the Zacks Consensus Estimate. In the last 7 days, none of the analysts revisited their estimates, thereby keeping the Zacks Consensus Estimate unchanged at 69 cents.

Mixed Earnings Surprise History

With respect to earnings surprises, Gannett has missed as well as topped the Zacks Consensus Estimate over the last four quarters in the range of negative 2.4% to positive 2.5%. The average remained at negative 0.1%. This suggests that Gannett has underperformed the Zacks Consensus Estimate by an average of 0.1% in the trailing four quarters.

Price Stats

Since its last earnings release on October 17, 2011, Gannett’s market price has increased 54.6% to $15.35 as of January 26, 2012. During trading hours on January 26, the stock reached an intra-day low of $15.16 and an intra-day high of $15.82.

Currently, the stock price is within its 52-week low-high range of $8.28 (attained on September 22, 2011) and $18.93 (achieved on February 7, 2011). From October 17, 2011 to January 26, 2012, the stock dropped to a low of $9.82 on October 18, 2011 and rose to a high of $15.82 on January 26, 2012.

Our Take

The current economic upheaval is taking a toll on publishing companies and Gannett is no exception. However, the companies are exploring new revenue generating avenues.

Advertising, which remains a significant source of revenue for the company, depends upon the global financial health. We observe that Gannett’s publishing advertising revenue fell 8.5% during the third quarter of 2011, following a 6.5% drop in the second quarter.

Tough macro-economic conditions along with softness in advertising demand impacted the results. Advertisers are shying away from making any upfront commitments in a cloudy economy.

Gannettis taking initiatives to diversify its business model and 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 portfolio.

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 revenue generation. News International, the subsidiary of News Corporation (NASDAQ:NWSA) started charging readers for online content of The Times of London and Sunday Times of London from June 2010.

In March 2011, The New York Times Company (NYSE:NYT) launched a pricing system similar to that of the Financial Times' metered system, whereby after browsing a certain number of free articles, readers will be asked to subscribe to enjoy full access to its articles on phones, tablet computers and the Internet.

Currently, we maintain our long-term Neutral rating on Gannett. However, the company holds Zacks #2 Rank that translates into short-term Buy recommendation.

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