Gannett Q3 earnings drop 10.5% as ad revenue falls
EmptyMcLEAN, Va. -- Gannett Co., the largest newspaper publisher in the country and owner of USA Today, said Wednesday that third-quarter earnings fell 10.5%, fueled in part by slumping real-estate ads and a tough comparison to year-ago results boosted by heavy political advertising.
Net income dropped to $234 million, or $1.01 per share, in the three months ended Sept. 30 from $261.4 million, or $1.11 per share, in the year-ago period. The latest quarter included a charge of $14.5 million for restructuring costs, mostly from severance costs including a consolidation of its circulation call centers.
Analysts polled by Thomson Financial expected profit of $1 per share. The estimates typically exclude one-time items.
Revenue fell 4% to $1.81 billion from $1.88 billion last year. Wall Street expected revenue of $1.82 billion.
Newspaper advertising revenue fell 6% to $1.19 billion. The revenue figures suffered not only from the loss of political advertising compared to 2006, but also from the divestiture of five of Gannett's 90 daily newspapers, including the sale of four dailies in May to New York-based GateHouse Media Inc.
Revenue from classified ads was down 7.7% compared to the year-ago period. In a conference call with investors, Gannett chairman and chief executive Craig Dubow said the slumping real estate market hit Gannett particularly hard. The company has multiple newspapers in Florida, California, Nevada and Arizona -- markets where the real estate slump has been pronounced and resulted in significantly reduced advertising.
Dubow said the company expects the real estate slump to continue into 2008.
Generally, newspapers across the country have seen revenue dwindle from classified ads due in part to competition from Web sites offering free classified ads.
Advertising at USA Today fell 6.6% quarter to quarter, reflecting what Dubow called "a choppy national advertising market."
Gannett subsidiary Newsquest, which publishes 18 daily newspapers and nearly 300 titles overall in the United Kingdom, outperformed U.S. operations, the company said.
Several analysts asked Dubow if Gannett, which owns and operates 23 television stations across the United States in addition to its publishing titles, is considering spinning off its newspaper division from the rest of the company. Two newspaper publishers, E.W. Scripps Co. and Belo Corp., announced plans to spin off their newspaper units into separate companies in the last two weeks.
Dubow said Gannett had no such plans.
Broadcasting revenue fell 3.4% to $189.5 million.
Through the first nine months of the year, Gannett has earned $810 million, or $3.46 per share, up from $807 million, or $3.40 per share, a year ago.
Nine-month revenue is down 2.6% to $5.58 billion. A 4.3% drop in newspaper advertising accounts for most of the loss.
Gannett shares rose 5 cents to close at $43.55 Wednesday.