By: Mark Fitzgerald Battered newspaper stocks that have lost as much as 90% of their value in the last year soared on Wednesday as investors looked on Gannett Co.'s better-than-expected second-quarter earnings report as a signal that the industry may at least be near its economic bottom.
Gannett (NYSE: GCI) itself zoomed 29% as it added $1.01 to its share price and closed in composite trading at $4.50. Wednesday's volume was more than triple the recent daily average, with 23.5 million shares trading hands.
Just before markets opened, Gannett reported a second-quarter profit, adjusted for special items, of 46 cents a share -- which beat the Wall Street analysts consensus of 35 cents a share.
Even some of the bad news in the Q2 report was taken as good by investors. Ad revenue at Gannett's U.S. newspapers including the flagship USA Today plunged 27.2% compared to the year-ago quarter, but that was an improvement on the first quarter of 2009, which was down 28.2% against 2008.
Even with the post-earnings spike, though, Gannett is trading much closer to its 52-week low of $1.85 a share than its high of $21.68.
In percentage terms other long-suffering newspaper stocks flew even higher than Gannett.
The McClatchy Co. (NYSE: MNI) , the stock Wall Street has turned on like a jilted lover, added 33.3% on Wednesday, gaining 14 cents to close at 56 cents.
Like McClatchy, Lee Enterprises Inc. (NYSE: LEE) stock has been mired below $1 share for nearly the entire year, except for brief periods, and is in danger of being delisted from the Big Board. But Wednesday, Lee shot up 29.1% to 67 cents, a 13-cent gain from the open.
The New York Times Co. (NYSE: NYT) -- which sent around a memo leaked Wednesday that reassured employees about its ability to handle its $1.01 billion debt -- rode the wave up, too, adding 41 cents, or 8.1%, to close at $5.46.
Not every analyst felt the buzz of sudden good feelings about the day, however. In a note to investors, Morningstar equity analyst Tom Corbett noted that Gannett's newspaper revenue had plunged and its balance sheet had been helped by massive cuts in employees, materials savings and plant consolidations.
"We think persistent cost-cutting in the face of double-digit revenue declines is a survival tactic, not a harbinger of imminent prosperity," Corbett wrote. "In our view, visibility regarding an upturn in business ad spending is nebulous at best."
Corbett wrote nearly the same thing in a note about The New York Times Co., which Tuesday announced a three-way deal to shed its final radio station for $45 million that will go directly to paying down debt.
"While we think the sale will give the company greater financial flexibility, we caution that its singular nature makes it no substitute for a vigorous and sustained recovery in print ad revenue," Corbett said.
For more on the business news of the day, check out E&P?s business-oriented
Fitz & Jen blog.
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