The current economic scenario does not look promising for publishing companies, who are bearing the brunt of waning print advertising demand, and The New York Times Company ( NYT - Analyst Report ) is no exception. However, the company witnessed sturdy circulation growth during the six-month period ending September 30, riding on the back of digital subscription initiatives.

According to the data released by Audit Bureau of Circulations (ABC), total average circulation, including print and digital, registered an increase of 40% to 1,613,865 for Monday to Friday publications and 28% to 2,100,893 for Sunday editions during the period.

Notably, digital circulation outpaced the print circulation. For weekdays, average digital circulation rose more than twofold to 896,352, whereas average print circulation dropped 6.9% to 717,513. Average digital circulation for Sunday surged 129% to 850,816, while average print circulation fell 1.8% to 1,250,077.

The data suggests that print circulation is continuing to lose its grip, whereas digital circulation is gaining traction, as more and more people are visiting the company’s website through smartphone and iPad applications. However, the only respite for print editions is the Sunday home delivery circulation, which saw a marginal increase of 0.6% to 998,080.

Apart from The New York Times, Wall Street Journal, the flagship newspaper of News Corporation ( NWSA - Analyst Report ) also experienced rise in circulation and holds on to its leading position as per the data available from ABC. Circulation for daily newspapers rose 9.4% to 2,293,798. However, USA Today, the iconic brand of Gannett Co., Inc. ( GCI - Analyst Report ) saw its circulation declining 3.9% to 1,713,833 but remained at the second position. The New York Times occupied the third position.

Although, The New York Times Company is blessed with sturdy total circulation, yet its advertising volume continues to remain under pressure as advertisers are shying away from making any upfront commitments, in an economy which is showing an uneven recovery. Total advertising revenue slid 8.9% to $182.6 million in the third quarter of 2012. Print advertising declined 10.9% during the quarter.

The sluggish advertising compelled The New York Times Company to post a loss per share of 1 cent that significantly missed the Zacks Consensus Estimate of earnings of 8 cents but remained flat compared with the prior-year quarter.

To mitigate this, the company is diversifying its business and adding new revenue streams. The company is also streamlining its cost structure, strengthening its balance sheet and restructuring its portfolio. The company is offloading assets that bear no direct relation with the core operations in order to refocus on its core newspapers and pay more attention to its online activities.

Currently, we have a long-term Neutral recommendation on the stock. However, the stock holds a Zacks #4 Rank that translates into a short-term Sell rating, indicating lower-than-expected third-quarter 2012 results.