Gannett (GCI) Q1 Earnings Beat Estimates, Decline Y-o-Y

Diversified media conglomerate, Gannett Co., Inc. (NYSE:GCI) delivered better-than-expected first-quarter 2017 results. The company posted adjusted quarterly earnings of 14 cents a share that beat the Zacks Consensus Estimate by a couple of cents but declined substantially from 36 cents reported in the year-ago quarter. Higher operating expenses adversely impacted the bottom line.

On a GAAP basis, the company reported loss of 2 cents a share compared with earnings of 33 cents posted in the prior-year quarter.

Gannett reported total revenue of $773.5 million in the quarter, up 17.3% from the prior-year quarter, and came ahead of the Zacks Consensus Estimate of $762.7 million. The increase in revenue came on the back of the buyout of Journal Media Group, Inc., North Jersey Media Group and ReachLocal, partly offset by fall in print advertising and circulation demand.

However, excluding the impact of foreign currency translations and selected exited operations, total revenue surged 19.3% from the year-ago period.

Shares of this McLean, Virginia based company were up roughly 3.5% during pre-market trading hours. In the past one months, the stock has increased 15.4% compared with the Zacks categorized Publishing-Newspapers industry that advanced 4.7%.

Advertising revenue increased 24% to $435.5 million, whereas circulation revenue jumped 7.8% to $283.3 million. Other operating revenue surged 20.3% to $54.7 million.

Adjusted EBITDA declined 13.3% to $69.7 million, whereas adjusted EBITDA margin contracted 320 basis points to 9%.

Segment Details

Publishing segment revenue came in at $694.9 million, up 5.6% from the prior year quarter. Excluding unfavorable foreign currency translation and selected exited operations, revenue advanced 7.6%. The increase in revenue was driven by incremental revenue from Jersey Media Group and the North Jersey Media Group and 3.7% jump in digital advertising performance in local U.S. markets. This was partly offset by a 17.7% decline in print advertising. Digital advertising revenue increased 8.3% to $94.6 million during the quarter.

ReachLocal segment revenue came in at $77.6 million during the quarter. Gannett has started introducing ReachLocal in several markets.

Strategic Initiatives

Gannett is realigning its cost structure and streamlining its operations to increase efficiencies and safeguard its earnings and cash flows from dwindling print advertising revenue. It also remains focused on improving its digital business with an aim to lower dependency on soft print media business and traditional advertising. Other publishing companies such as New Media Investment Group Inc. (NYSE:NEWM) , The New York Times Company (NYSE:NYT) and The McClatchy Company (NYSE:MNI) are also trying to adapt to different revenue generating ways.

In sync with this trend, Gannett invested an undisclosed amount in Digg, a digital media company. The company also intends to undertake strategic acquisitions in order to strengthen its position in the newspaper industry.

Gannett acquired Journal Media Group, the owner of the Milwaukee Journal Sentinel and other newspapers. The company recently completed the buyout of leading golf publication, Golfweek. In Jul 2016, Gannett completed the acquisition of North Jersey Media Group Inc., and in August, the company concluded the buyout of digital marketing solutions company ReachLocal, Inc. Gannett recently acquired SweetIQ Analytics Corp., provider of location and reputation management Software-as-a-Service solutions, which will help expand ReachLocal's portfolio of products.

Other Financial Aspects

In the quarter, Gannett paid dividends of $18.2 million but did not buy back shares. During the quarter, net cash flow from operating activities was about $31.1 million and incurred capital expenditures of $15 million, thereby generating free cash flow of approximately $16 million. Management expects to incur capital expenditures of approximately $65–$75 million in 2017.

The company ended the quarter with a cash balance of $89.5 million and a revolving line of credit of $385 million.

Outlook

Gannett reiterated its revenue forecast of $3.15–$3.22 billion for 2017 but raised its full year adjusted EBITDA projection by $30 million to a range of $355–$365 million.

Gannett currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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