What happened

Shares of newspaper publishing company Gannett (GCI 2.88%) gained 18.2% through noon ET on Thursday after missing on sales -- but beating on earnings -- last night.

Analysts had pegged Gannett for $744.5 million in Q4 revenue and a profit of $0.16 per share. In fact, Gannett reported this morning that while its quarterly sales were only $730.7 million, profits came in at a robust $0.24 per share -- 50% better than Wall Street had predicted.    

So what

In fact, the news was even better than that. Gannett's Q4 profit was the company's first quarterly profit after four straight quarters of losses, and only its third such profit out of the past 10 reported quarters.

So how did Gannett get back in the black?

Growing low-cost, high-margin digital revenues from online-only newspaper subscriptions certainly helped. Such subscriptions grew 24% year over year in Q4 to more than 2 million paid subscriptions, helping to slow the company's overall decline in revenues. (However, total revenue at the company still slumped 12% year over year.). The company is also paying down debt, reducing its interest costs in this current high-interest environment -- paying off $146.6 million over all of 2022, and $47.3 million in Q4 alone.

Now what

All this being said, it's important for investors to view Gannett's good news in the context of the company's big picture. Yes, debt is down a bit -- but Gannett still has nearly $1.3 billion in debt still to pay off -- versus only $94 million in cash. And yes, revenues are growing nicely in digital, but overall revenues are still in a state of secular decline.

Looking ahead through the end of 2023, Gannett forecasts that its sales will shrink to no more than $2.8 billion, a 5% decline year over year. And after losing money (on a full-year basis) for four straight years, Gannett might finally earn a profit in 2023 -- $10 million at best, or about $0.07 per share -- management warned that it might also end up losing as much as $20 million this year -- a $0.14-per-share loss.  

Long story short, Thursday was good news for Gannett -- but this newspaper operator isn't out of the woods yet.