Three months ago, Gannett
Despite the impact of hurricanes, which created added expenses for both newspapers and television stations in the Southeast, Gannett announced a 14.6% jump in earnings to $1.18, a penny below estimates, on revenues that rose 11.3% to $1.82 billion. Circulation revenues at the nation's largest newspaper publisher grew 1.4% to $304.6 million, and the contents of those publications were packed with advertising, particularly classified employment and real estate.
Paid advertising pages at USA Today rose 6% to 1,082, lifting revenues at the flagship daily 10.2% for the quarter and 12% year-to-date. On a pro-forma basis (Gannett has made a string of acquisitions lately, including Clipper Magazine and NurseWeek), advertising revenues jumped 9.6%, with increases of 11.9% in classified spending, 8.7% in national, and 7.5% in local. Total newspaper revenues increased 10.3% to $1.61 billion, and despite a double-digit increase in segment expenses, operating income improved 6% to $429.5 million.
Gannett also reported strength in the broadcasting sector. The firm owns nearly two dozen television stations, which posted a 34.4% increase in operating cash flows. The April purchase of the Captivate Network -- a provider of advertising for the elevators of large office buildings -- and Olympic coverage from General Electric's
Gannett is the first of the major media firms to report third-quarter earnings, but at least some of its recent strength looks to be company-specific. Tribune, New York Times
After delivering industry-leading revenue growth last quarter, Gannett is poised to repeat the accomplishment. And while competitors have trimmed their outlook, with estimates forecasting last year's median (among newspaper publishers) 11.4% third-quarter earnings gain to slow to around 5.4%, Gannett managed to grow earnings by nearly 15%.
Furthermore, the industry bellwether enjoys one of the highest operating margins in the business (28% in the latest quarter), a healthy free cash flow margin of 13% (two points above the industry average), and an ambitious stock-repurchase program (10 million shares last quarter alone). At less than 17 times this year's projected earnings, Gannett remains a compelling choice.
Fool contributor Nathan Slaughter gets more of his news from the Internet these days but still enjoys the sports page. He owns none of the companies mentioned.