Gannett Earnings Up But Print Decline Continues

NEW YORK (AP) - Gannett Co., the country's biggest newspaper publisher, said fourth-quarter earnings grew by 30 percent because of aggressive cost-cutting and a boost from political advertising. But investors focused Monday on the company's stagnant revenue and pushed Gannett shares 3 percent lower.

The publisher of USA Today and 80 other newspapers cut staff, closed plants and got a timely bump from its TV division, which benefited from advertising tied to the November elections. However, Gannett's print news business, which accounts for more than two-thirds of revenue, continues to suffer. Print advertising revenue declined by nearly 6 percent in the final three months of 2010, and the fourth quarter capped four straight years of revenue reductions at Gannett's publishing division.

Joscelyn MacKay of Morningstar Inc. summed up the trouble facing Gannett and other publishers: "Circulation volume has been declining for two decades," she said. "As a result, advertisers are less inclined to pay newspapers for their ads. And at the end of the day, Gannett is still a newspaper company."

That helps explain why after the release of results, Gannett's share price fell 45 cents, or 3 percent, to close Monday at $14.74.

Gannett's results may give some sense of what's to come from other big publishers. Shares of The New York Times Co., which reports fourth-quarter results Thursday, closed down 4 percent Monday at $10.11. McClatchy Co., which reports Feb. 8, slipped 4 cents to $5.10.

Gannett earned $174 million, or 72 cents per share, up from $134 million, or 56 cents per share, in the same quarter of 2009. Stripping out one-time items, Gannett said earnings per share climbed to 83 cents from 70 cents - two cents better than analysts expected, according to FactSet Research.

Revenue came in essentially flat at $1.46 billion, roughly in line with average forecast of $1.47 billion.

Revenue from Gannett's print business fell 4.7 percent from the same quarter a year ago to $1.1 billion. Newspaper adverting revenue fell 5.9 percent to $722 million. The decline was even worse than the 5.1 percent drop in the third quarter compared with the previous year.

Until the fourth quarter, the declines have generally been shrinking. Gannett blamed the bigger drop in part on a weak U.K. economy, which declined unexpectedly in the fourth quarter. Gannett's U.K. subsidiary owns 17 daily newspapers.

Despite reductions in print, Gannett has remained profitable largely by shrinking its work force and consolidating operations such as printing plants to reduce costs. Overall expenses declined 4.2 percent to $1.15 billion from $1.2 billion.

But the more significant factor in the fourth quarter was the performance of the company's TV stations.

Political campaigns spent heavily on commercial time, lifting Gannett's broadcast revenue 27 percent to $233 million. Excluding political ads, Gannett said broadcast revenue would have climbed a more modest 1.2 percent. The division reported income of $116 million, up 47 percent from $79 million a year earlier.

The McLean, Va.-based company's Web operations continued to grow. Digital revenue climbed 5.2 percent to $166 million, but still only accounted for about 11 percent of overall revenue.

Without any major races going on now, Gannett expects overall television revenue in the first quarter will be up only in the "very low" single digits on a percentage basis.

During a call with analysts, Chief Operating Officer Gracia Martore said it was too early to give a forecast on publishing revenue. She said only that recent snow storms on the East Coast had unspecified impact on some of its regional businesses.

"We would like the weather to clear up a little bit better," she said. "But we will keep you posted on that as the months unfold."