Gannett Co., which owns 82 U.S. daily newspapers and 23 television stations, fell the most in almost 10 months on concern that TV revenue growth won’t be enough to compensate for weakness in print advertising.
Television sales for the first quarter of this year should have percentage growth in the “high single-digits” from a year earlier, the company said today in a statement. That’s a slowdown from 45.7 percent growth to $280.2 million in the fourth quarter, aided by political advertising and a 38.7 percent gain in fees from pay-TV operators.
While the election provided a temporary lift, Chief Executive Officer Gracia Martore is working to bolster the company’s digital offerings to make up for a decline in advertising and print subscriptions. Gannett started online subscription programs for most of its newspapers last year and has relied on revenue growth from its other digital properties, such as CareerBuilder, a jobs listing site.
Gannett, based in McLean, Virginia, fell 6.7 percent to $18.51 at the close in New York, the largest one-day drop since April. The slide wiped out most of the stock’s gain this year before today.
“A lot of the strength this quarter was from television, and that was really driven by political advertising, which won’t be around next year,” Doug Arthur, a media analyst with Evercore Partners in New York, said in an interview. “Newspaper profitability was a little disappointing relative to trends and expectations.”
Gannett’s stock typically sells off after quarterly announcements, said Arthur, who rates the stock overweight.
Advertising in the publishing division fell 2 percent to $657.5 million, dragging down the unit’s revenue growth to 3.7 percent for a total of $1.04 billion. Circulation sales gained 16.8 percent, boosted by the online subscription business for local newspapers. Operating income in the division climbed 13.5 percent to $128.7 million.
The company expects to draw 250,000 to 300,000 paying online subscribers to its newspapers by the end of the year, compared with around 46,000 at the end of 2012, Martore said today on a conference call.
Political ad revenue totaled $91.2 million for the quarter, helping lift total sales 9.4 percent from a year earlier to $1.52 billion. In December, Gannett had forecast more than $90 million in election-related sales. Leaving out items such as severance payments, earnings were 89 cents a share, topping the 88-cent average of analysts, according to data compiled by Bloomberg.
Sales from online businesses advanced 3.1 percent to $187.2 million, boosted primarily by growth at CareerBuilder, according to the company.
Net income fell 12 percent to $103.1 million, or 44 cents a share, from $116.9 million, or 49 cents.
The newspaper business provides more than 70 percent of Gannett’s sales, underscoring the importance of developing a digital strategy. Gannett’s flagship newspaper, USA Today, still relies on a free model online.