NEW YORK - Gannett Co Inc forecast third-quarter earnings far stronger than analyst estimates, sending its shares soaring, as cost cutting is helping it soldier through a tough, albeit improving, advertising market.
Shares jumped 18 percent early Tuesday after Gannett issued a forecast that suggests the publishing industry's third quarter results could look much like they did in the second quarter, when most of them beat estimates thanks to lower expenses rather than higher sales.
Gannett beat the number by a yard, all on cost-cutting, said Benchmark Co analyst Ed Atorino. Revenues are disappointing.
Other publishing stocks also rallied. New York Times Co's shares rose 10 percent, while McClatchy Co's climbed 9 percent on the New York Stock Exchange.
Gannett expects to report third-quarter profit of 39 cents to 42 cents a share, excluding items, when it issues its actual earnings statement on October 19. That would far surpass the current estimate of 29 cents among analysts polled by Reuters Estimates.
Revenue is another matter. The publisher of USA Today projected revenue of $1.31 billion to $1.32 billion, short of the $1.37 billion Wall Street expected -- a sign that while advertising may have steadied it remains below what analysts had hoped. The forecast came on the same day Gannett announced a $400 million debt offering.
Chief Financial Officer Gracia Martore, in a statement, pointed to the difficult advertising market in the publishing business, the absence of helpful Olympic and political advertising in the broadcast business, and lower revenue from its digital operations.
But she also trumpeted cost-cutting by the largest U.S. newspaper publisher. Our continued efforts to achieve efficiencies and further consolidations company-wide along with significantly lower newsprint expense resulted in another substantial decline in our operating expenses, she said.
But the broader industry has yet to find a way to jumpstart advertising sales. The first half of 2009 was one of the worst periods yet for newspapers.
Ad sales for print and online combined fell nearly 30 percent in the first and second quarters, compared with the year before, according to numbers on the Newspaper Association of America's website. In 2008, they fell nearly 17 percent.
The ad declines have led many media experts to predict the demise of newspapers, and companies such as Gannett have seen their stocks fall more than 40 percent in the past 12 months. Some publishers, including Tribune Co, were forced to file for bankruptcy.
More recently, however, newspaper stocks have rallied, as their executives and other ad-driven media businesses have seen declines easing in coming quarters. Moves to slash jobs and strip away any other extra expenses have also pleased investors. In the last three months, shares of Gannett are up 155 percent.
Gannett's debt offering relates to $200 million of notes due in 2014, and $200 million of notes due in 2017. It plans to use the proceeds to repay outstanding loans. (Reporting by Paul Thomasch, editing by Maureen Bavdek and Derek Caney)