NEW YORK (AP) — Gannett Co., the publisher of USA Today and 81 other daily newspapers, posted a slight decline in its third-quarter net income Monday as advertising revenue fell.
The results matched Wall Street's expectations but were not enough to reassure investors. The company's stock dropped nearly 8 percent in midday trading after the earnings announcement.
"They made guidance, but there are issues with (the) drop in newspaper ads that's not getting any better," said Benchmark Co. analyst Edward Atorino.
Gannett earned $99.8 million, or 41 cents per share, in the July-September period. That's down nearly 2 percent from $101 million, or 42 cents per share, in the same period a year earlier.
Excluding special items, such as restructuring charges related to job cuts, Gannett earned 44 cents per share, matching analysts' expectations. The company laid off 700 workers, or about 2 percent of its work force, in June due to the slump in advertising revenue at its newspapers.
Revenue fell nearly 4 percent to $1.27 billion from $1.31 billion, but it met the expectations of analysts polled by FactSet. Atorino said that "some favorable factors," such as a lower tax rate and slightly better-than-expected results in Gannett's digital operations, helped the company meet expectations. But newspaper advertising was worse than expected, he added.
The weak economy, coupled with an ongoing reader and advertiser migration to the Internet, has hurt ad revenue at newspapers. The results at Gannett, the first newspaper company to report earnings and a bellwether for the industry, pulled other newspaper stocks lower on Monday. The New York Times Co.'s shares fell more than 5 percent and McClatchy Co. dropped 3.6 percent.
For Gracia Martore, Gannett's new CEO, there were some signs for optimism. In a conference call with analysts, she said the company's earnings reflect the positive effect of Gannett's digital efforts and other initiatives. At the same time, she added that the results also show "the challenges of managing our businesses in the midst of a tremendous amount of economic uncertainty and a softening global economy."
Gannett named Martore as CEO earlier this month after Craig Dubow resigned for health reasons.
Martore said Gannett's digital revenue continued to show strength compared with a year earlier.
Revenue at Gannett's publishing segment, which includes its newspapers, declined 5 percent to $917.8 million from $969.4 million. The company had warned investors that advertising revenue in its newspaper division fell during the quarter, extending a decline that began in 2006.
The company said a decline in advertising at USA Today was partially offset by an increase in national advertising at its Newsquest division in the U.K.
Gannett, which owns 23 television stations, said its broadcasting revenue declined 6 percent to $174.3 million from $185.3 million in the year-ago quarter, which benefited from political advertising ahead of the midterm elections.
The company's CareerBuilder website helped push revenue at its digital division up 10 percent to $173.9 million. Across all of Gannett's digital properties, which include revenue generated by its newspaper websites, revenue also grew 10 percent, to $272.6 million.
Gannett's stock fell 78 cents, or 7.1 percent, to $10.16 in midday trading Monday, amid a broader market decline. The stock, which has traded in a 52-week range of $8.28 and 18.93, is down 33 percent since the beginning of the year, compared with a 3.9 percent decline for the Standard & Poor's 500 index.