April 17 (Bloomberg) -- Dow Jones & Co., owner of the Wall Street Journal and the Factiva news database, said first-quarter profit fell less than analysts estimated, sending the shares to their biggest gain this year.

Net income declined 63 percent to $22.6 million, or 27 cents a share, from $61.5 million, or 74 cents, a year earlier, when the publisher had a gain from a legal settlement, according to a statement today. Earnings beat the $16.1 million average estimate of six analysts surveyed by Bloomberg.

Sales climbed 18 percent to $507.2 million, led by Factiva. New York-based Dow Jones bought the outstanding 50 percent of Factiva from Reuters Group Plc as part of Chief Executive Officer Richard Zannino's effort to reduce the company's reliance on newspapers. The Wall Street Journal's U.S. advertising sales were little changed last month from March 2006, an improvement from a 10 percent decline in February.

``It was a pretty good quarter,'' said Steven Barlow, an analyst at Prudential Equity Group in New York. He has a ``neutral weight'' rating on the stock and doesn't own it. ``The domestic Journal, as much as they're worried about it, did better than expected.''

Excluding a tax gain, profit of 24 cents beat the 19-cent average analyst estimate compiled by Bloomberg. Profit last year was buoyed by a gain of 75 cents a share from a legal settlement related to its former Telerate unit.

Zannino reiterated a forecast for a 25 percent to 40 percent rise in 2007 per-share profit before one-time items.

Shares of Dow Jones rose $1.13, or 3.2 percent, to $36.24 4:19 p.m. in New York Stock Exchange composite trading, the biggest gain since Dec. 14. The stock has fallen 4.6 percent this year.

First to Report

``This is the latest indicator that our transformation plan -- aimed at diversifying our heavy reliance on traditional print revenue -- is working,'' Zannino said today in the statement.

Dow Jones, also owner of Barron's, MarketWatch and Dow Jones Newswires, is the first U.S. newspaper publisher to report earnings this season. The industry will probably report an average revenue drop of about 5 percent, according to Goldman Sachs Group Inc. analyst Peter Appert. Merrill Lynch & Co. analyst Karl Choi is anticipating an 18 percent drop in per- share earnings, the biggest in five years.

The three largest publishers, Gannett Co., Tribune Co. and the New York Times Co. report April 19.

Cost Cutting

Revenue increased at the enterprise group, which includes Factiva as well as Dow Jones Newswires, indexes, licensing and financial services. Sales gained 79 percent to $173.2 million.

Assuming Factiva, bought last quarter, was fully owned in both periods, total revenue would have risen 2.6 percent, Dow Jones said.

The consumer media unit, which contains the Wall Street Journal and Dow Jones Online, posted a 1.7 percent increase in revenue to $280.4 million. Ad revenue at Dow Jones online rose 30 percent.

Advertising revenue at the Wall Street Journal fell 0.6 percent in March. Sales fell 1.8 percent for the quarter as technology and classified advertising declined. Barron's increased its ad sales by 11.5 percent.

Reduced Size

Dow Jones introduced a new version of the Wall Street Journal this year, reducing it to 12 inches in width from about 15 inches.

The narrower Wall Street Journal cut newsprint costs and helped Dow Jones save $5 million in the first quarter, Zannino said. The newspaper publisher will probably save $20 million a year in newsprint and other expenses, Zannino said.

The Wall Street Journal's daily circulation of 2.04 million trails only Gannett's USA Today.

Local media revenue declined 3.5 percent to $55.5 million.

Dow Jones sold six of the company's Ottaway community newspapers last year in New York, Connecticut, Pennsylvania, California and Michigan, reaping $282.5 million.

The company used some of the proceeds to fund the purchase of Factiva. Dow Jones would consider selling more of the remaining 23 Ottaway newspapers if an offer was high enough, Zannino said.

To contact the reporter on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net.

Last Updated: April 17, 2007 16:36 EDT