Gannett Co. (GCI:US) reported a drop of less than 1 percent in second-quarter sales as declining print advertising held back growth for the USA Today publisher, which is increasingly focused on the television industry.
Even as licensing fees for its TV stations gained 62 percent from a year earlier, print ads continue to slump, falling 5.3 percent to $562.5 million, the company said in a statement. Excluding some items, earnings were 58 cents a share, in line with the average analyst estimate, according to data compiled by Bloomberg.
Chief Executive Officer Gracia Martore is shifting the company’s core business to television to help overcome the decline in newspapers. The McLean, Virginia-based publisher agreed to buy Belo Corp. (BLC:US) for about $1.5 billion on June 13, almost doubling the TV stations it owns to 43.
“I don’t think I was the only person looking at this quarter and not cheering,” said Ed Atorino, an analyst at Benchmark Co. in New York. “Gannett shows that the newspaper business as a whole won’t be as good as anticipated.”
The shares fell (GCI:US) 1.9 percent to $25.87 at the close in New York. The stock rose 34 percent on June 13 after the Belo deal was announced, the biggest one-day gain since 2009, and is up 44 percent this year. The deal will make Gannett the fourth-largest owner of major network affiliates, giving it leverage with cable and satellite distributors when they renegotiate licensing fees.
The deal is expected to increase earnings by about 50 cents a share within 12 months, Gannett said at the time.
News Corp., the biggest U.S. newspaper publisher by market value, spun off its print division almost a month ago to focus on TV, and Tribune Co. (TRBAA:US) announced plans this month to do the same. Martore said on a conference call that while Gannett executives are focusing on integrating Gannett and Belo for now, “we will never rule anything out.”
Second-quarter TV revenue totaled $212 million, a 3.2 percent gain from last year. The company also said it plans to begin a $300 million, two-year share buyback to replace its current one, while leaving its dividend program unchanged.
Net income fell 5.2 percent to $113.6 million, or 48 cents a share, from $120 million, or 51 cents, a year earlier. Sales were $1.3 billion, down from $1.31 billion in the second quarter of 2012.
The company said it expects a “mid-teens” percentage decrease in TV revenue for the third quarter because the same period last year was lifted by political advertising and Olympic spending.
(Gannett held a conference call today to discuss its results. For details, click here.)
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