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Why Gannett Stock Popped Today

By Rich Smith – Aug 6, 2021 at 1:02PM

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Digital subscriptions seem to be the (profitable) key to success for newspapers going forward.

What happened

Shares of news media giant Gannett (GCI -1.60%) jumped after the company beat earnings this morning, and are following peer The New York Times Company higher -- up 10.3% as of noon EDT.

Heading into the second quarter, analysts had forecast that Gannett would lose as much as $0.36 per share this quarter on sales of only $791 million. In fact, Gannet reported $804.3 million in revenue -- and $0.10 per share in profit.  

A tablet showing a digital newspaper sits on top of a pile of newspapers.

Image source: Getty Images.

So what

As we saw with The New York Times earlier in the week, sales of digital newspaper subscriptions were key to Gannett's success. While total revenue at Gannett grew less than 5% year over year, digital-only subscriber numbers grew 41% year over year to 1.4 million, leading to a 33% increase in digital revenue, and flipping the company from a $3.32 per share loss a year ago to a $0.10 per share profit.

Now what

Management declined to give earnings guidance in its report. Still, going forward, Gannett plans to lean heavily upon its new digital subscription model for USA Today subscribers, and that seems like the right plan. It's helped turn the company profitable already, and helped the company produce $23.1 million in free cash flow as well -- quite a turnaround relative to the $44.2 million in cash Gannett burned in last year's Q2.

No wonder investors are pleased.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends The New York Times and recommends the following options: short October 2021 $46 calls on The New York Times. The Motley Fool has a disclosure policy.

Stocks Mentioned

Gannett Stock Quote
Gannett
GCI
$2.46 (-1.60%) $0.04
The New York Times Stock Quote
The New York Times
NYT
$36.01 (-1.75%) $0.64

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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