Things Are Looking Up at Gannett

If you just listened to the media over the years, you might have fallen under the impression that there may never be any good news for media companies. After media giant Gannett Co. Inc. (NYSE: GCI) reported earnings, there may be some exceptions.

Gannett managed to handily beat earnings expectations. This may be aided by acquisitions, but the flux within the media sector at this time is a situation that is likely to persist.

The media giant reported that its earnings came to $24.6 million in the fourth quarter of 2016. That translates to $0.21 in earnings per share, but on an adjusted earnings basis the report was $0.50 per share. Thomson Reuters was calling for earnings of $0.42 per share on an adjusted basis, and Zacks had a consensus estimate of $0.37 per share.

Gannett’s fourth quarter revenue of $867 million was also ahead of forecasts. Thomson Reuters listed a consensus estimate of $847.3 million.

Net cash flow from operating activities was approximately $53.0 million for the quarter. At the end of 2016, Gannett’s cash balance was $114.3 million. The company had a balance on its revolving line of credit of $400.0 million, or net debt of $285.7 million.

Perhaps what matters from a valuation stance for longer-term investors is the annual earnings and revenues. Gannett had a $52.7 million profit on $3.05 billion.

Gannett’s earnings report showed that the company repurchased 3.75 million common shares at an average cost of $8.71 per share. Digital-only subscriptions rose by 71.1% and the “digital-only plus Sunday” rose by 62.4% and topped 200,000 for the first time. Gannett showed that the USA TODAY had organic revenue growth of 1.4% as the growth of digital acted to offset print declines.

The national digital advertising revenue was up 19.1%, or up by 16.4% if you exclude acquisitions, and the digital advertising revenue trends were led by a 43% growth in mobile ad revenue and 37% in video ad revenue. ReachLocal experienced a 76% quarter over quarter growth rate in the company’s Facebook-focused media solution.

Gannett did note on guidance that it is currently in the process of finalizing its 2017 budget, so it will provide more detailed expectations for 2017 late on in the first quarter. Its preliminary 2017 outlook is for a mid-single-digit increase in reported revenues and a slight decrease in adjusted EBITDA margins.

Robert Dickey, Gannett’s president and chief executive officer, said after earnings:

We are pleased to end the year on a high note with both revenues and adjusted EBITDA meaningfully improved from the third quarter and exceeding the company’s expectations as a result of accelerating digital revenue trends and excellent operational management. 2016 was an important year for Gannett. We acquired and integrated businesses with annual revenues of approximately $800 million, advanced our efforts to drive the company towards a more digital future, and invested in new and promising technologies for advertisers and consumers in key areas such as VR, mobile and video.

Coming into earnings, Gannett’s stock was down about 10% so far in 2017. The post-earnings reaction took shares up more than 7% to $9.32. Gannett has a 52-week trading range of $7.30 to $17.72, and the current market capitalization is right at $1.1 billion.

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