Gannett Co., the biggest newspaper publisher in the U.S., said fourth-quarter earnings grew by 30% because of aggressive cost-cutting and a boost from political advertising. But investors focused Monday on the company’s stagnant revenue and pushed Gannett shares 3% lower.
The publisher of USA Today and 80 other newspapers cut staff, closed plants and got a timely bump from its TV division, which benefited from advertising tied to the November elections. However, Gannett’s print news business, which accounts for more than two-thirds of revenue, continues to suffer. Print advertising revenue declined by nearly 6% in the final three months of 2010, and the fourth quarter capped four straight years of revenue reductions at Gannett’s publishing division.
Joscelyn MacKay of Morningstar Inc. summed up the trouble facing Gannett and other publishers: “Circulation volume has been declining for two decades,” she said. “As a result, advertisers are less inclined to pay newspapers for their ads. And at the end of the day, Gannett is still a newspaper company.”
Gannett’s results may give some sense of what’s to come from other big publishers. Shares of The New York Times Co., which reports fourth-quarter results Thursday, and McClatchy Co., which reports Feb. 8, both dropped Monday.
Gannett earned $174 million, or 72 cents per share, up from $134 million, or 56 cents per share, in the same quarter of 2009. Revenue came in essentially flat at $1.46 billion, roughly in line with average forecast of $1.47 billion.
Revenue from Gannett’s print business fell 4.7% from the same quarter a year ago to $1.1 billion. Newspaper adverting revenue fell 5.9% to $722 million. The decline was even worse than the 5.1% drop in the third quarter compared with the previous year.
Until the fourth quarter, the declines have generally been shrinking. Gannett blamed the bigger drop in part on a weak U.K. economy, which declined unexpectedly in the fourth quarter. Gannett’s U.K. subsidiary owns 17 daily newspapers.
Despite reductions in print, Gannett has remained profitable largely by shrinking its work force and consolidating operations such as printing plants to reduce costs. Overall expenses declined 4.2% to $1.15 billion from $1.2 billion.
But the more significant factor in the fourth quarter was the performance of the company’s TV stations.
Political campaigns spent heavily on commercial time, lifting Gannett’s broadcast revenue 27% to $233 million. Excluding political ads, Gannett said broadcast revenue would have climbed a more modest 1.2%. The division reported income of $116 million, up 47% from $79 million a year earlier.
The company’s web operations continued to grow. Digital revenue climbed 5.2% to $166 million, but still only accounted for about 11% of overall revenue.
Without any major races going on now, Gannett expects overall television revenue in the first quarter will be up only in the “very low” single digits on a percentage basis.
