(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.

Also worrisome to investors may have been the lack in Gannett's press release of any guidance on its newspaper business, a departure from recent quarters. "Companies that haven't reported guidance have been punished," said Ed Atorino, media industry analyst at Benchmark Capital.

On a later conference call with anlaysts, Gannett executives didn't exactly demonstrate enthusiasm about a near-term rebound in the newspaper ad business. Those cautious tones appeared to heighten investor worries about the fitness of the increasingly endangered print-media industry.

As for a specific outlook, Gannett's finance chief, Gracia Martore, who will soon become the company's COO, said that first-quarter ad revenue at its community newspaper division (all its dailies except USA Today) would likely exceed earlier estimates from Gannett management by "a couple of percentage points."

Looking backward at the most recenly ended quarter, Atorino said the company met his print ad revenue estimate, while its digital and broadcasting revenue results exceeded his targets.

Gannett's broadcasting revenue came to $183 million in the fourth quarter, down 14% from the year-ago period, which was boosted by political ads during the election cycle. Digital ad revenue was $157.7 million, down 7.2% from a year ago.

Excluding items, Gannett reported an adjusted profit of 72 cents a share, better than the 64 cents analysts had expected. Revenue came to $1.5 billion, just exceeding the Wall Street consensus target of $1.46 billion.

A year ago, Gannett posted an adjusted bottom line of 85 cents -- which excluded the non-cash effects of billions of dollars of write downs and asset impairments -- on revenue of $1.7 billion.

Among other newspaper companies, shares of the New York Times closed Monday down by 3.3% to $12.49, while Lee Enterprises fell 2.6% to $4.13.

McClatchy shares, however, gained 3% to $5.51, Lee Enterprises rose 1.4% to $4.30, and E.W. Scripps ( SSP) advanced 2.8% to $6.99.

-- Written by Scott Eden in New York

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