Market Perform/Aggressive - Price 14.06 on Oct. 20
by Barrington Research

Gannett topped expectations for the quarter, which were laid out very recently in conjunction with the $500 million debt offering. While advertising pressures clearly continue to exist, and a 28% decline in newspaper-ad revenues is not a great situation, the pace of decline for the quarter reflects a decelerating rate of decline from the previous quarters in 2009. This percentage would have been less severe had currency adjustments not added to the pressures. GAAP [generally accepted accounting principles] EPS for the quarter of 31 cents compared with our 25-cent estimate and 25-cent to-31-cent guidance....We expect some of these favorable trends [to] persist into the fourth quarter, and are nudging our estimate for Q409-EPS to 50 cents from 45 cents, and full-year E-EPS to $1.65 from $1.55. We are also now using $1.65 for both 2010 and 2011 (previously $1.60 and $1.55, respectively). Market cap: $3.3 billion.

UNDERVALUED ENTERPRISE

Google? I read the newspaper quarters and see that they have cut costs to stay ahead of the game -- New York Times (NYT) and Gannett (GCI) have beaten back bankruptcy. But no one has been able to beat the migration, and Google's just still taking share from Yahoo! (YHOO), although Bing from Microsoft is a real threat. My take: When GOOG gets to 19 times earnings, it is a buy, but for the first time, multiple analysis matters.

7

But then there are companies that I remember being in the $20s and $30s, companies like Gannett (GCI), New York Times (NYT), Hartford (HIG), Lincoln (LNC). I just can't believe where they are.

From a recent Mad Money show: "No, that's a big red flag. That dividend is not going to hold up. I don't want to own any newspaper; they're toxic."

From a recent Mad Money show:"No, that's a big red flag. That dividend is not going to hold up. I don't want to own any newspaper; they're toxic."

high divd

Q: At 18, the stock trades at less than six times forward earnings.

A: We got interested in it when it was in the 20s, so we are not too bad off now. We are not blind to the changes that are occurring in the newspaper industry. I can't draw the plan that they are going to use, but I know that most of these guys, particularly the guys at Gannett, get it.

Gannett, whose shares have fallen this year by 54%, to 18, after a 35% decline in 2007, is the leader in what may be the most hated market sector: newspapers. Its second-quarter earnings were down 22%, to $1.01 a share, and the rest of the year looks difficult. A lot of bad news, however, already is in its shares, which trade for less than six times projected 2009 profits. Gannett is a long way from going out of business. Instead, it's a highly contrarian investment. Investors get a 9% dividend yield, well-covered by earnings.

no subscribers

Prints money in the form of newspapers but has failed to give X and Y gens an alternative

good management but failing business