Updated Research Report on Gannett - Analyst Blog

Gannett Co., Inc.'s GCI first-quarter 2014 results remained impressive, as the bottom line beat the Zacks Consensus Estimate and surged 27% year over year, buoyed by sturdy performance of the Broadcasting segment that gained from the acquisition of Belo Corp. This is the third straight quarter that the company has outdone the Zacks Consensus Estimate. Notably, the top line registered 13.4% growth but missed the Zacks Consensus Estimate. The Digital segment also favorably impacted the quarter.

However, soft advertising demand has been weighing on Gannett's performance. Advertising, which remains a significant source of revenue, is largely dependent upon the global financial health. We observe that publishing advertising revenue fell 4.8% during the quarter. Other publishing companies such as Journal Communications, Inc. JRN and The New York Times Company NYT are also encountering a similar setback.

Advertisers are shying away from making any upfront commitments in an economy that is showing tepid recovery. As a result, Gannett is taking initiatives to diversify its business model by adding new revenue streams in an effort to make it less susceptible to unfavorable economic conditions.

The company is also adapting to the changing face of the multiplatform media universe, which currently includes Internet, mobile, tablet, social media networks and outdoor video advertising in its portfolio. This is evident from the company's acquisition of the television-station operator, Belo Corp. This deal is a perfect fit for the company as it is expected to transform Gannett's business model, by shifting its focus from low-margin newspapers to the high-margin multi-media business. The acquisition of 6 television stations of London Broadcasting Company underscores the company's step toward the same.

Gannett initiated a subscription-based model, commenced Digital Marketing Services in top markets and refurbished its iconic brand, USA TODAY, to generate new advertising and marketing revenue sources.

Cost containment is one of the aggressive approaches undertaken by publishing companies to keep bottom-line growth intact amid declining revenue and a shrinking market share, and Gannett is no exception. The company has been realigning its cost structure and streamlining its operations to increase efficiencies, and in turn, its operating performance.

Gannett currently carries Zacks Rank #3 (Hold).

Stock Worth Considering

A stock worth considering in the publishing sector is The E.W. Scripps Company SSP sporting a Zacks Rank #1 (Strong Buy).