Gannett Co. Inc. Earnings: Falling Revenue Strains Margins, Profit Drops

S&P 500 (NYSE:SPY) component Gannett Co. Inc. (NYSE:GCI) reported its results for the fourth quarter. Gannett is an international news and information company operating mainly in the realms of publishing, digital and broadcasting.

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Gannett Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for the publisher fell to $116.9 million (49 cents per share) vs. $174.1 million (72 cents per share) a year earlier. This is a decline of 32.8% from the year earlier quarter.

Revenue: Fell 5.1% to $1.39 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: GCI reported adjusted net income of 72 cents per share. By that measure, the company beat the mean estimate of 69 cents per share. Analysts were expecting revenue of $1.39 billion.

Quoting Management: Gracia Martore, president and chief executive officer, said, “During a period of weak economic growth, Gannett once again differentiated itself within the media industry by delivering solid profitability across each of our market-leading business segments – publishing, broadcast and digital – as well as free cash flow of $775 million in 2011. Gannett’s strong balance sheet and cash generation give us the flexibility to execute our growth strategy and successfully compete in the digital era while paying down debt and returning capital to shareholders.” Martore continued, “In the fourth quarter, we continued to leverage our local media franchises and iconic national brands across multiple platforms, reinventing local journalism for the digital age and providing innovative marketing solutions for our advertisers. Revenue from our digital properties company-wide rose to 21 percent of total revenue in the quarter. Excluding even-year political advertising, core broadcast revenues were up strongly in the 2011 fourth quarter. We are positioning for growth in print and digital media through new subscription models delivered across platforms, capturing opportunities in adjacent businesses, and continuing to focus on operational efficiencies.”

Key Stats:

Gross margins fell 4.7 percentage points to 43.6%. The contraction appeared to be driven by falling revenue, as the figure fell 5.1% from the year earlier while costs rose 3.5%.

The company has now seen net income fall in each of the last four quarters. In the third quarter, net income fell 1.6% while the figure fell 22.5% in the second quarter and 22.8% in the first quarter.

Revenue has fallen in the past four quarters. Revenue declined 3.5% to $1.27 billion in the third quarter. The figure fell 2.2% in the second quarter from the year earlier and dropped 5.4% in the first quarter from the year-ago quarter.

The company topped expectations last quarter after falling short of forecasts in the third quarter with net income of 44 cents versus a mean estimate of net income of 45 cents per share.

Looking Forward: Analysts appear increasingly optimistic about the company’s results for the next quarter. The average estimate for the first quarter of the next fiscal year has moved up from 35 cents a share to 39 cents over the last sixty days. For the fiscal year, the average estimate has moved up from $2.09 a share to $2.11 over the last ninety days.

Competitors to Watch: The E.W. Scripps Company (NYSE:SSP), The New York Times Company (NYSE:NYT), The McClatchy Company (NYSE:MNI), News Corporation (NASDAQ:NWSA), Media General, Inc. (NYSE:MEG), Lee Enterprises, Inc. (NYSE:LEE), Journal Communications, Inc. (NYSE:JRN), A. H. Belo Corporation (NYSE:AHC), and Meredith Corporation (NYSE:MDP).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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