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Will Gannett (GCI) Stock Be Helped By A Deal For Cars.com?

NEW YORK (TheStreet) -- Gannett Co.  (GCI), one of the newspaper owners of Cars.com, is exploring a bid for all of the auto sales website and has discussed joining with private equity firms in a deal that could reach $3 billion, sources say, Reuters reports.

Gannett is one of the five newspaper publishers that back Classified Ventures which owns Cars.com. Cars.com helps people buy and sell cars on the Internet.

Must Read: Warren Buffett's 10 Favorite Growth Stocks

Gannett wants to be part of any future deal involving Cars.com, either by leading a buyout or rolling over its existing equity stake to support a deal, sources add, according to Reuters.

Gannett holds a 27% stake in Classified Ventures.

Shares of Gannett are down slightly to $26.95 in heavy trading.

TheStreet Ratings team rates GANNETT CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate GANNETT CO (GCI) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • GCI's revenue growth has slightly outpaced the industry average of 5.1%. Since the same quarter one year prior, revenues rose by 13.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, GCI's share price has jumped by 36.55%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GCI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • 45.53% is the gross profit margin for GANNETT CO which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.21% trails the industry average.
  • GANNETT CO's earnings per share declined by 43.2% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, GANNETT CO reported lower earnings of $1.65 versus $1.79 in the prior year. This year, the market expects an improvement in earnings ($2.70 versus $1.65).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Media industry. The net income has significantly decreased by 43.4% when compared to the same quarter one year ago, falling from $104.57 million to $59.16 million.
  • You can view the full analysis from the report here: GCI Ratings Report

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