Gannett shares shot up 17.6% Tuesday after the company said it would post Q3 earnings per share (EPS) of at least 39 cents – beating even the most optimistic of Wall Street analysts’ forecasts. The newspaper/TV company also announced $400 million in bond offerings.
“In the third quarter, the company continued to successfully navigate through the economic headwinds both in the US and UK. Although overall advertising revenue comparisons remain difficult, our third quarter year-over-year publishing comparisons improved again versus first and second quarter comparisons. Our broadcast comparisons reflect the almost total absence of Olympics and political advertising which were approximately $50 million last year during the third quarter, partially offset by the near tripling of retransmission fees this year. CareerBuilder and Digital segment revenues are expected to be lower for the quarter on a pro forma basis, consistent with year-over-year trends for the first two quarters of 2009,” said Exec. VP & CFO Gracia Martore, who continues to hold down the fort while CEO Craig Dubow recovers from back surgery.
“Our continued efforts to achieve efficiencies and further consolidations company-wide along with significantly lower newsprint expense resulted in another substantial decline in our operating expenses. As a result, we continue to generate substantial operating cash flow which enabled us to lower debt by about $195 million in the quarter,” Martore said.
Analysts surveyed by Thomson/First Call had been expecting Gannett to post EPS of 28 cents. That was the consensus figure, with the range of estimates from 24 to 33 cents. But even the high end of that range is well below what Gannett now says it will report for Q3 – EPS of 39-42 cents.
Q3 revenues are expected to be $1.307-1.320 billion, down from $1.637 billion a year earlier. The new revenue forecast is also below the analysts’ consensus of $1.381 billion, so Gannett is beating expectations on cost-cutting, not yet on revenue generation. Operating cash flow is expected to come in at $241-252 million.
Gannett issued the updated guidance as it announced plans to sell $400 million in new bonds to institutional investors. The sale will consist of $200 in senior notes due 2014 and $200 million in senior notes due 2017. The proceeds will be used to pay down debt under Gannett’s revolving credit facility and term loan.
RBR-TVBR observation: Evidence continues to come in to support the view that the economy – particularly the advertising business – has finally turned the corner.