Argus Upgrades Gannett To Buy

  • Shares of Gannett Co Inc GCI have appreciated 30.71 percent over the last 3 months, hitting a high of $16.50 on November 2.
  • Argus’ John Eade has upgraded the rating on the company from Hold to Buy, with a price target of $20.
  • Eade mentioned that Gannett Co has a “clean” balance sheet, a “hefty” dividend yield of 3.9 percent and a share repurchase program, while the stock could have 25 percent upside.

According to the Argus report, “Management is focused on controlling costs and is pursuing a growth-by-acquisition strategy.”

The company has announced in early October that it intended to acquire Journal Media Group Inc JMG for $280 million. Gannett Co expects the acquisition to add $69 million in EBITDA and $450 million in revenue in 2016, as well as an additional $25 million in savings in 2017.

Analyst John Eade also mentioned that “Gannett expects to finance the merger using cash and borrowing under its $500 million revolving credit facility. The deal is expected to close in 1Q16.”

For 3Q, the company reported a 4.5 percent decline in operating revenue, with a 5.7 percent decline in adjusted EBITDA. “EPS from continuing operations came to $0.43, down from $0.44 a year earlier but above the consensus forecast of $0.37,” Eade stated.

Management indicated that it would remain focused on reducing operating costs, with a target of lowering annualized expenses by $67 million by 1H2016. “CFO Alison K. Engel also noted that revenue would benefit from recent acquisitions,” the report said.

The board has approved share buybacks worth $150 million, while also declaring a regular quarterly dividend of $0.16 per share for yield of approximately 3.9 percent.

“The payment will be made on January 4, 2015 to holders of record as of December 4,” Eade added.

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