Market Overview

Argus Upgrades Gannett To Buy, Sees 25% Upside

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  • Shares of Gannett Co Inc (NYSE: GCI) have appreciated 30.71 percent over the last three months, hitting a high of $16.50 on November 2.
  • Argus’ John Eade has upgraded the company from Hold to Buy, with a price target of $20.
  • Eade mentioned that Gannett 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 announced in early October that it intended to acquire Journal Media Group Inc (NYSE: JMG) for $280 million. Gannett 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 Q3, 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.

Latest Ratings for GCI

DateFirmActionFromTo
Jul 2018DowngradesNeutralUnderweight
Feb 2017DowngradesBuyHold
Oct 2016MaintainsHold

View More Analyst Ratings for GCI
View the Latest Analyst Ratings

Posted-In: Argus Research Company John EadeAnalyst Color Long Ideas Upgrades Analyst Ratings Trading Ideas

 

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