Gannett: Earnings Preview

Gannett Co. Inc. (GCI), a diversified media conglomerate, is scheduled to report its third-quarter 2010 financial results before the bell on Friday, October 15, 2010. The current Zacks Consensus Estimate for the quarter is currently pegged at 49 cents a share.

Second-Quarter 2010, a Synopsis
Gannett Company, the publisher of the nation's largest-selling daily newspaper USA Today, posted better-than-expected second-quarter 2010 results, buoyed by effective cost-cutting measures, lower newsprint expense and gradually improving advertising environment.

The quarterly earnings of 61 cents a share surpassed the Zacks Consensus Estimate of 52 cents and soared 32.6% from last year's 46 cents. Gannett's total revenue slid by 1.6% to $1,365.1 million in the quarter under review, following a decline of 4.1% witnessed in first-quarter 2010.

Third-Quarter 2010 Consensus
Analysts surveyed by Zacks expect Gannett to post third-quarter 2010 earnings of 49 cents a share. The current Zacks Consensus Estimate represents a year-over-year growth of 11.4%. The estimates in the current Zacks Consensus for the quarter range from a low of 46 cents to a high of 51 cents.

The current Zacks Consensus Estimate has remained stagnant over the last 7 days, with none of the 6 analysts covering the stock revising their estimates.

With respect to earnings surprises, Gannett has topped the Zacks Consensus Estimate over the last four quarters in the range of 14.3% to 22%. The average remained at 17.3%. This suggests that Gannett has outperformed the Zacks Consensus Estimate by an average of 17.3% in the last four quarters.

Gannett in Neutral Lane
Gannett is diversifying its business by adding new revenue streams to make it less susceptible to economic conditions. The company is also streamlining its cost structure, strengthening its balance sheet, and rebalancing its portfolio.

Moreover, with advertisers gradually returning to the market, Gannett hinted that the rate of fall in advertising revenue is decelerating. However, the company’s high dependence on advertising revenue, which is hinges on the health of the economy, remains a potential threat. Hence, we prefer to remain Neutral at this juncture, given a sluggish economic recovery and a soft advertising spending environment.

Currently, Gannett maintains Zacks #3 Rank, which translates into a short-term Hold recommendation.