Monday, February 04, 2013

Earnings | Shares dive, and some bullet points

Gannett's stock is trading lower as investors weigh the company's just-released fourth-quarter results.

GCI recently traded for $18.77, down $1.07, or 5.4%. This may represent some profit-taking; since the third-quarter report on Oct. 15, GCI has jumped 11%, while the widely watched S&P 500 index climbed just 5% during the same period.

The overall stock market is down, however, with the S&P falling nearly 1%. The Dow Jones Industrial Average is at 13,880, also down about 1%.

“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, told Bloomberg News. “Newspaper profitability was a little disappointing relative to trends and expectations.”

GCI's stock typically sells off after quarterly announcements, according to Arthur, who rates the stock "overweight."

From the earnings report, following are some items worth highlighting. Note that this year's fourth quarter was one week longer than the year-ago quarter.

Print ad decline narrows
The company's single biggest source of revenue fell once more: 2%, to $658 million. But that was the smallest print advertising decline over the past eight quarters. (This spreadsheet shows revenue changes by major operating division for 2011 and 2012.)

Companywide revenue climbed 9.4%, to $1.52 billion. As expected, the Broadcasting division saved the day on the strength of political advertising during the blistering presidential election. Broadcasting soared 43.9%, to $287.5 million. But that political boost won't exist in 2013.

Circulation rev way up
The across-the-board print subscription rate hikes that accompanied the paywall launches last year continue to boost circulation revenue in the community newspaper division.

In the fourth quarter, circulation rev soared 16.8% to $313 million. That followed a much smaller increase in the third quarter, 5.6%, and a slight decline in the second quarter, as the paywalls extended across the division.

Barring another huge rate increase, year-over-year comparisons will grow tougher as 2013 unfolds.

In a conference call with media analysts, however, CEO Gracia Martore said GCI expects to draw 250,000 to 300,000 paying online-only newspaper subscribers by the end of the year vs. 46,000 at the end of 2012. That's the first time I've seen a digital-only subscription forecast.

Digital growth slides anew
Revenue in the Digital Segment, a portfolio that includes CareerBuilder and ad services subsidiary PointRoll but not the community newspapers, rose just 3.2% in the fourth quarter, to $187.2 million. That was the smallest year-over-year increase across the last eight consecutive quarters.

Jobs site CareerBuilder drove that increase.

In the earnings release, Corporate said that digital revenues company-wide, including the Digital Segment and all digital revenues generated by the other business segments, were $375.6 million, a 29.4% increase from the fourth quarter a year ago.

The company-wide increase was driven primarily by the impact of the paywall-related subscription hikes as well as higher revenue associated with digital advertising and marketing solutions across all segments.

National ads still soft
National advertising, which is a proxy for USA Today's financial health, fell 6.4%. While that includes the entire company, the flagship daily accounts for a disproportionate share. The paper is now in its ninth month of new turnaround leadership under Publisher Larry Kramer.

To be sure, the trend is improving. National fell 7.6% in the third quarter; 18.2% in the second quarter, as Kramer was coming on, and 14.5% in the first quarter.

It's worth noting that USAT's ad sales were restructured well before Kramer's arrival, with the February 2012 appointment of Mary Murcko as president of Gannett-wide national sales. Also, in September, USAT redesigned its digital sites and the print edition to attract more advertising.

In the conference call with analysts, Martore cautioned that the paper's restructuring would take time.

"This wasn't a one- or two-quarter transformation," she said in response to a question, according to Seeking Alpha's transcript. "This is a multi-year transformation. And I'd say that's where we stand with USA Today right now is we are getting great feedback on the print side, we're getting terrific feedback on our digital platforms. I think we've made a lot of great enhancements. I think our sports vertical is going to be a good one for us. I think our travel work that we're doing is going to bear fruit. But it doesn't just bear fruit in one quarter, it's going to take a little time."

Sports Media absent
One of the company's biggest revenue initiatives is the USA Today Sports Media Group, which combines all sports content from USAT, plus the community dailies and the 23 TV stations. It is expected to generate an additional $300 million in revenue by 2015.

Today's statement doesn't mention the group once, however, so its unclear what impact it may have had on the quarter's results.

However, in her conference call with analysts, Martore said:

"In 2012, we streamlined our coverage and turned USA Today Sports Media Group into one of the nation's top 5 digital sports destinations, with over 20 million unique visitors each month where it stands today. We have a solid foundation in place and are now working to leverage our strong position by helping advertisers and marketers reach their sports-minded target audiences."


  1. Another multi-year USAT transformation is just another excuse we've heard before and over and over again.

  2. Ha, stock is tumbling. Forecast isn't strong and they can't just keep raising the copy price to make up for the bad service they got when they out sourced distribution at GPS.

  3. I could hear Charlie Brown's teacher speaking in my ear over the Sports Media gibberish from Gracia. They are clearly in trouble evident by what she didn't say. By the way...they entered the market as a top 5 sports property. It hasn't grown into one. In fact, it's pretty much stood still since launch.

  4. It was silly for them to think they could even compete in the same universe as ESPN. Any rival to ESPN should not even try. No one can out-ESPN ESPN. And USA Today Sports isn't even on par to compete for the scraps - CBS Sports, Fox Sports,Yahoo Sports and NBC Sports are much better at everything - and that's really not saying much. So, again, it's another crystal castle screw-up that's about to be repositioned and glossed over. Buesse was ineffective where he was prior and they ran him out of the company. He's nothing more than a "I'm the smartest guy in the room" guy who came into GCI blowing up a lot of smoke - kinda like GCI's CMO continues to do. He's an ineffective leader and manager. He's hired a lot of his friends and their friend's friends who were looking for jobs and what do they have to show for it? It will be a miracle if they get to the $300 Million they promised. To do that, they actually need something to sell and that, they do NOT have.

    Sell your GCI now. $18-19 or maybe $20-21 is about as good as it will get.

  5. thanks for share....


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