Gannett Craters Despite Beating Street

(Gannett earnings story updated to include closing stock prices and details from the company's Monday conference call.)

MCLEAN, Va. (TheStreet) -- USA Today publisher Gannett(GCI) turned in fourth-quarter results Monday that surpassed Wall Street expectations, but the stock dropped sharply nonetheless.

The newspaper chain, which also operates a slew of dailies in midsize cities across the country, appeared, at least on the surface, to affirm the conventional wisdom that the advertising recession had eased.

Gannett said revenue from print ads came to $790.8 million in the fourth quarter, down 18% from the same period of 2008, when it took home $963.4 million. In the second and third periods of the year, the company suffered ad revenue declines of about 30% compared to the corresponding year-ago periods.

Still, the comparisons with 2008 grew steadily easier as the year progressed. Many have argued that the ad recession -- though strongly exacerbated by the general economic gloom in the wake of the financial meltdown -- has been ongoing for years as reading habits shift from hardcopy to digital. Thus, the terrible numbers of 2009, including Gannett's fourth quarter, compare to already downtrodden figures from a year ago.

Further, Gannett's bottom-line performance has depended on a series of ferocious cost cuts and scaled-back content as the company laid off staff (24% of its workers in 2009), eliminated sections and reduced page counts throughout its many titles.

By the close of trading Monday, Gannett shares had lost $1.13, or 7%, to $15.02, after falling as low as $14.12 intraday. The stock enjoyed a torrid December, gaining more than 60% in value as investors ran up the stock in anticipation of an end to the ad recession. It's a trend that began as early as last summer, after Gannett and several other newspaper chains (including McClatchy(MNI), Lee Enterprises(LEE) and even the New York Times(NYT)) lifted themselves off the mat after a period when default and bankruptcy weren't out of the question.