Preview: Will Gannett Q1 Earnings Signal Newspaper Revenue Rebound?

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Gannett Co., the largest U.S. newspaper publisher, is scheduled to report its first-quarter earnings before the stock market opens Friday.

WHAT TO WATCH FOR: Just how much longer will the newspaper industry’s three-year streak of crumbling revenue last?

It didn’t end during the first three months of the year for Gannett, which owns USA Today and more than 80 smaller dailies. The company’s management told investors last month that its publishing division’s first-quarter ad revenue — newspapers’ main source of income — would be down in the high single digits.

But a drop of less than in 10 percent marks progress. Gannett’s publishing ad revenue fell by 18 percent in 2009’s final quarter.

A miserable first quarter last year makes for easier comparisons this year. Gannett’s publishing ad revenue plunged by 34 percent during the first three months of 2009.

Despite the progress, Gannett seems to be bracing for further revenue erosion at its newspapers through at least the second quarter. The still-bleak outlook is the main reason Gannett ordered USA Today’s nearly 1,500 employees to take one week of unpaid leave between Feb. 28 and July 3. Most of USA Today’s workers had to take two weeks of unpaid leave last year.

Cost-cutting measures like that, along with a series of mass layoffs in recent years, have enabled Gannett to boost its profit even as its newspapers bring in less money.

The company also is getting a boost from its broadcasting division, which includes 23 TV stations. Management last month predicted first-quarter ad revenue from broadcasting would rise in the mid-teens.

WHY IT MATTERS: If newspaper ad revenue doesn’t bounce back soon, Gannett will be more likely to impose more staff furloughs or lay off more of its remaining 35,000 workers (down from 46,100 employees three years ago).

A persisting slump also could prompt Gannett to close or sell some of is newspapers. The company stopped publishing the print edition of the Tucson Citizen in Arizona last year and recently struck a deal to sell The Honolulu Advertiser.

WHAT’S EXPECTED: Analysts polled by Thomson Reuters expect earnings of 41 cents per share on revenue of $1.32 billion.

LAST YEAR’S QUARTER: In the first quarter 2009, Gannett earned $77.4 million, or 34 cents per share, on revenue of $1.38 billion

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