Gannett Company, Inc. (GCI), the publisher of the nation’s largest-selling daily newspaper USA Today, recently posted better-than-expected first-quarter 2010 results buoyed by effective cost-cutting measures, lower newsprint expense and improved advertising demand. Operating expenses, excluding one-time items, dropped 11.3%.
The quarterly earnings of 50 cents a share surpassed the Zacks Consensus Estimate of 41 cents, and rose twofold over 25 cents posted in the prior-year quarter. On a reported basis, including one-time items, earnings came in at 49 cents a share, up 44.1% from 34 cents delivered in the year-ago quarter.
Management hinted that the advertising environment within the U.S. and U.K. economies is showing some signs of recovery.
Gannett’s total revenue slid by 4.1% to $1,322.4 million in the quarter under review, after registering a decline of 14.4% in the top-line in fourth-quarter 2009, helped by strengthening economies and advertising gain related to the Winter Olympic Games.
The rate of fall in publishing advertising revenue has been decelerating since fiscal 2009, and continues to shrink in fiscal 2010 as advertising demand firms. After plunging 17.9% in fourth-quarter 2009, publishing advertising revenue dropped 7.9% to $665.9 million in the quarter under review. Publishing circulation revenue also dipped 5.1% to $284.5 million.
The murmurs about advertisers returning to the market are gaining ground. However, the positive effects have yet to be realized in the current financial results.
Like Gannett, other newspaper companies such as News Corporation (NWSA) and The New York Times Company (NYT) have been grappling with the slump in print advertising demand, with advertisers migrating to the Internet driven by increasing readership and lower ad prices online than in print.
To curb shrinking advertising revenue and improve market shares battered by the recent economic downturn, the publishing companies are now even considering charging readers for viewing online content.
News International, the subsidiary of News Corporation will soon begin charging readers for online content for The Times of London and Sunday Times of London effective June 2010, whereas The New York Times Company plans to introduce a ‘pay and read’ model for NYTimes.com in 2011.
The publisher of 83 U.S. daily newspapers, Gannett said that total broadcasting revenue surged 16.7% to $167.5 million. Television revenue jumped 15.4% to $161.3 million.
Digital revenue fell marginally by 1.8% to $140.6 million due to sluggishness in employment advertising demand that affected CareerBuilder’s results, partly offset by a sharp rise in revenue at PointRoll.
Gannett lowered its debt by approximately $260 million, and generated operating cash flow of $274.1 million (up 19.1%) in the quarter.
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