Newspaper company shares dropped sharply in 3Q

Since the start of the quarter, shares in The McClatchy Co., for instance, lost 35 percent to close Tuesday at $4.40. Gannett Co. shares dropped 22 percent to $16.91. Stock in the E.W. Scripps Co. lost 22 percent to $7.07, adjusted for a 1-for-3 reverse split.

In the same period, the Standard & Poor's 500 index lost 9 percent.

Gannett and McClatchy both announced major job cuts during the quarter as advertising revenue plummeted even further than anticipated as retailers, employers, auto dealers and others cut back.

Gannett shares dipped most in mid-August, when the nation's largest newspaper publisher announced it was eliminating 1,000 jobs, including 600 layoffs.

A month later, McClatchy slashed 1,150 jobs because of the advertising woes, its second 10 percent reduction in three months.

On Friday, McClatchy announced it had renegotiated a $1.175 billion credit agreement with its lenders, a move analysts say helped avert a potential technical default. But it came at a cost: The company agreed to put up more collateral and pay higher interest rates.

In July, analyst Craig Huber, then with Lehman Brothers, downgraded Scripps stock to "Underweight" from "Overweight" on concerns that the decline in local advertising revenue will continue to worsen.

The company had just spun off its digital and cable network businesses into a separate company, Scripps Networks Interactive Inc., that trades separately. So share price activity in the third quarter reflects mostly the broadcast and newspaper properties.

Some newspaper stocks did better than the market as a whole.