Shares of Gannett Co. (GCI) surged 28.9% to close at $4.50 on Jul 15, 2009. The upbeat sentiment in the stock was due to the company’s stronger-than-expected second-quarter results, due to cost-cutting initiatives such as job cuts, salary reduction, furloughs and lower newsprint expenses. The company is laying off nearly 1,400 employees or about 3% of its headcount.

Gannett reported EPS of $0.46, excluding special items, surpassing the Street estimate of $0.37. Although, EPS fell more than 50% year over year, it increased sharply by 84% on a sequential basis. On a reported basis, the company’s EPS was $0.30, compared to a net loss per share of $10.03 in the prior-year quarter.

Total revenue, however, tumbled 17.8% to $1,412.6 million due to sustained weakness in the U.S. and U.K. economies. The turbulent economy continues to hamper advertising revenue. Gannett’s Publishing segment revenue declined 25.8% to $1,117.3 million as newspaper advertising plummeted 32%. Broadcasting revenue plunged 20.6% to $153 million, due to the absence of political advertising and softness in advertising demand for auto and retail.

Digital segment revenue aggregated $142.4 million in the reported quarter compared to $20.0 million in the prior-year quarter, due to the consolidation of results for CareerBuilder and ShopLocal in the third quarter of 2008.

The company’s debt position improved after the commencement of the private offer on Apr 7, 2009, as it extended the maturities of 26% of outstanding bonds to 2015 and 2016. The company’s total debt was $3.5 billion at the end of the second quarter of 2009.

Like Gannet Co., other newspaper companies are facing a slump in advertising demand as readers migrate to the Internet and alternative media. Those other companies include Washington Post Company (WPO), McClatchy Company (MNI), Journal Communications (JRN), and The New York Times Company (NYT).

However, several newspapers’ online businesses have been showing a reverse trend recently. Gannett’s digital operations would have fallen 18% if it would not have undertaken internal restructuring that added more businesses to the division.

GCI is a Zacks #4 Rank (“Sell”).

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