Bear Stearns Knocks Down Gannett Rating

By: Jennifer Saba Bear Stearns lowered its rating on Gannett from "outperform" to "peer perform" based on decreasing advertising revenue.

In a note to investors, analyst Alexia Quadrani raised concerns about Gannett's fall-off in ad revenue. Gannett went from an average ad revenue decline of 4.6% in October and November to a decline of 14.5% in December. January's results are expected to come in similar to December's numbers.

Trends at USA Today are also troubling, noted the research firm. Ad revenue is down 12.7% in Q4 at the paper.

A key reason Bear Stearns upgraded Gannett's stock was on the potential of political advertising dollars flowing to the broadcast division. So far, Gannett has not reaped those dollars. Bear Stearns expects the company will experience an uptick in political ad revenue later in 2008.

"We still believe Gannett shares look inexpensive, particularly when you compare them to its slower growing or more levered peers," Quadrani wrote. "With deteriorating fundamentals on the horizon and continued negative estimate revisions, we see no positive catalyst in the near term."