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Diversified media conglomerate Gannett Company, Inc. (GCI - Analyst Report) is set to offer $500 million senior notes due to mature in 2020. This Zacks Rank #2 (Buy) stock will utilize the proceeds to payback borrowings under its revolving credit facilities, and the remainder, if any, would be channeled toward meeting other obligations and for general business purposes.
The news of the debt offering came just 2 days after Gannett reported its second-quarter 2013 results, wherein earnings of 58 cents a share missed the Zacks Consensus Estimate by a penny but jumped 4% from the year-ago quarter.
The year-over-year growth was primarily driven by its all access content subscription model coupled with sturdy performance of its Broadcasting and Digital segments. However, soft advertising demand remains a laggard.
Tough economic conditions along with softness in advertising demand have been weighing upon the company’s performance. Consequently, Gannett is trying every means to shield itself from the impact of an unstable market and has been contemplating new revenue generation avenues.
Advertising, which remains a significant source of revenue, is largely dependent upon the global financial health. We observe that Gannett’s total publishing advertising revenue fell 5.3% during the second quarter, following a decline of 4.5% in the first quarter. Other publishing companies such as Journal Communications, Inc. (JRN - Snapshot Report), The E.W. Scripps Company (SSP - Snapshot Report) and The New York Times Company (NYT - Analyst Report) are also encountering a similar setback.
Advertisers are shying away from making any upfront commitments in an economy that is showing an uneven recovery.
Gannett is taking initiatives to diversify its business model by adding new revenue streams in an effort to make it less susceptible to the 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.
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. Gannett acquired Mobestream Media and BLiNQ Media to enhance its Digital Marketing Services.
The company has successfully deployed the subscription based model in 78 local publishing markets. We believe that despite glitches in the economy, the subscription based model still promises revenue generation.
The company recently announced the acquisition of television-station operator, Belo Corp. The deal will serve as a game changer for Gannett as it will solidify its foothold in the rapidly growing broadcast media business by almost doubling its existing broadcast portfolio from 23 to 43 stations.