Gannett Tops Street; Ad Revenue Still Weak

Updated to include further detail from the company's earnings release, and stock movements.

MCLEAN, Va. (TheStreet) -- USA Today publisher Gannett(GCI Quote) generated little news with its third-quarter earnings report, having already "preannounced" results last month, but the numbers continued to demonstrate how weak the advertising market remains.

Overall, print advertising revenue in the third quarter shrank 28.4% to about $700 million from a year ago, the company said. This represents a slight slowing in the pace of the declines. In the first and second quarters of the year, Gannett's ad revenue dropped 34% and 32%, respectively.

Still, shares of Gannett gained some momentum to the upside as Monday's regular session unfolded, following the broader market higher. Perhaps, too, investors were reacting to the improving ad-revenue trend.

Late Monday morning, Gannett shares were changing hands at $13.90, up 90 cents, or 7%.

Media watchers have been looking closely at quarterly sales results from newspaper companies in an effort to divine whether the ad recession has truly come to an end. Last week, rival newspaper chain McClatchy(MNI Quote) said its ad revenue fell 28% from the same period in 2008 after booking 30% declines in first half of the year.

On the bottom line, Gannett reported adjusted earnings (which excludes charges) of 44 cents a share, just beating Wall Street expectations of 41 cents. A year ago, Gannett earned 76 cents a share.

On the top side of the ledger, Gannett's total revenue fell 18.8% to $1.34 billion from $1.64 billion a year ago. That's about even with analysts' forecasts, which pegged the company's third-quarter top line at $1.33 billion.

The charges in the just-ended period totaled $44.7 million and stemmed from writedowns in the value of assets, layoff costs and the "consolidation of facilities." Gannett, for example, shuttered the Tucson, Arizona, Citizen earlier this year, and has laid off or bought out nearly 1,500 employees since the beginning of the recession.

That the company has been able to profit at all these last few quarters in the face of its deteriorating core business is a direct result of those cost cuts and layoffs and, to a lesser degree, plunging prices for newsprint. After all, slowing demand for newspapers means slowing demand for the paper it's printed on.

Breaking out the various sorts of ads and their sales during the quarter, Gannett provided a litany of hurt. Sales of classified ads, widely believed to be a dead business for newspapers, dropped nearly 37% from a year ago. (The help-wanted sections have been especially damaged by the rise of online employment services.) Retail ads fell 21%, meanwhile, and national advertising declined 25%.

-- Written by Scott Eden in New York

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