Gannett (GCI) Tops On Q4 Earnings, Revenues, Guides For FY18

Gannett Co., Inc. (NYSE:GCI) delivered better-than-expected fourth-quarter 2017 results. The diversified media conglomerate posted adjusted quarterly earnings of 55 cents a share that surpassed the Zacks Consensus Estimate of 47 cents and jumped 10% from 50 cents reported in the year-ago quarter.

The company gained from sturdy digital performance, particularly at ReachLocal and cost containment endeavors. These helped it to overcome tough print advertising trends. Management highlighted that it intends to focus on enhancing marketing solutions and consumer businesses going forward.

Shares of this McLean, Virginia based company have increased 38.1% in the past six months compared with the industry’s growth of 33.3%.

Gannett’s total revenue of $854.2 million also came ahead of Zacks Consensus Estimate of $848.5 million but declined 1.5% from the prior-year quarter. On a same store basis, total operating revenue decreased 8.8% to $791 million. Lower print advertising and soft circulation revenues hurt the top line. These were partially offset by increased digital advertising revenue.

Advertising revenue fell 4.6% to $490.1 million, whereas circulation revenue inched up 0.5% to $299.4 million. Other operating revenue increased 16.7% to $64.8 million.

Adjusted EBITDA increased 2.2% to $132.7 million, while adjusted EBITDA margin expanded 50 basis points to 15.5%.

Segment Details

Publishing segment revenue came in at $764.8 million, down 3.2% from the prior year quarter. On a same-store basis, publishing segment operating revenue fell 10%. Print advertising and circulation revenues declined 18.5% and 6.7%, respectively, on a same-store basis. Digital advertising revenue grew 7.3% to $118.9 million. On a same store basis, the same improved 0.7%. Digital-only subscriber volumes surged 49.5% from the prior-year quarter and now total approximately 341,000.

ReachLocal segment revenue came in at $101.4 million during the quarter, reflecting an increase of 34.9% from the prior-year period. This came on the back of sturdy growth in North America and transition of the company’s clients onto the ReachLocal platform.

Strategic Initiatives

Gannett is realigning 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. The company also intends to undertake strategic acquisitions in order to strengthen its position in the industry.

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.

Other Financial Aspects

In the quarter, Gannett paid dividends of $17.9 million but did not buy back any shares. During the quarter, net cash flow from operating activities was about $72.8 million and incurred capital expenditures of $25.4 million, thereby generating free cash flow of approximately $47.3 million. Management expects to incur capital expenditures of approximately $65-$75 million in 2018.

The company ended the quarter with a cash balance of $120.6 million and a revolving line of credit of $355 million.

Guidance for 2018

The company now envisions full year revenue in the band of $2.930-3.030 billion and adjusted EBITDA projection of $330-$340 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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