Gannett Gets Boost from Investor

Highlights include Gannett Co. (GCI - Snapshot Report), The New York Times Co. (NYT - Snapshot Report), Lee Enterprises (LEE - Snapshot Report), Washington Post Co. (WPO - Analyst Report) and The E.W. Scripps Company (SSP - Analyst Report).

Gannett Shares Rocket as Investor Ups Stake

Strong flagship paper and controlling stake in classified website allure investor

Shares of Gannett Co. (GCI - Snapshot Report), the publisher of USA Today, jumped 8.3% Monday following an announcement last week that a major shareholder had more than doubled it stake the company.

The investment echoes our thesis that publishers with strong national brands, an aggressive online strategy and a manageable debt load are more likely to withstand the recession and adapt their business models for future profitability.

That is not to say Gannett is immune from the troubles facing the industry. Like its competitors -- including The New York Times Co. (NYT - Snapshot Report), Lee Enterprises (LEE - Snapshot Report), Washington Post Co. (WPO - Analyst Report) and The E.W. Scripps Company (SSP - Analyst Report) -- Gannett, the country's largest newspaper publisher with over 85 dailies, is suffering accelerating declines in ad revenue and circulation. The company recently announced that it expected first-quarter ad revenue to fall by 35% year-over-year.

In the latest blow, Marriott International plans to stop delivering newspapers automatically at guests' doors in June, but rather upon request only. USA Today and The Wall Street Journal are the two most frequently delivered papers.

When the economy soured, newspaper publishers already had been suffering circulation declines for several years as readers moved online.

In attempt to slash costs fast enough to meet falling revenues, publishers have been firing staff, forcing pay cuts, trimming dividends, sharing reporter pools and printing operations, moving online and in a last resort, filing for bankruptcy to stave off creditors. Many have closed altogether. Gannett has fired thousands of employees over the last year and recently launched an exchange offer to push out its debt – all due in 2011 and 2012 – by four years.

What sets Gannett apart from the pack is its thriving USA Today online operations, which grew ad revenue by 27% in February, and its majority stake in job-hunting website, careerbuilder.com. While national advertising will rebound somewhat with the economy, a portion of classified has moved to wider-spread, more targeted, lower-priced or free options, such as eBay or Craigslist, and will not likely return.

Gannett's investment positions it to capture that growing business and recover with the economy, while other classified-heavy publications continue to languish.