UPDATE 3-Media General posts profit, stock soars

* Q2 EPS $0.90 vs EPS loss $24.12 last year

* Newspaper ad revenue falls 26 percent

* Some ad declines ease, echoing other publishers

* Share price more than doubles, reaches $5.33

By Robert MacMillan

NEW YORK, July 22 (Reuters) - Media General Inc (MEG.N) posted a quarterly profit on Wednesday on cost cuts and said advertising revenue declines are beginning to ease, a cautious but hopeful note for battered U.S. newspaper publishers that sent some of their stocks rocketing.

Media General's shares more than doubled in morning trading, reaching a high of $5.33, 127 percent above their closing price on Tuesday. They are still off their year high of $19.47 last September.

While Media General, which publishes The Tampa Tribune, Richmond Times Dispatch and other papers, reported a 26 percent drop in newspaper ad revenue, the company said classified and retail ad declines were less steep than in recent quarters.

Media General reported second-quarter net income of $20.6 million, or 90 cents a share, compared with a loss of $532.2 million, or $24.12 a share, a year ago.

This year's quarter included gains from selling a Florida television station and various tax benefits.

Revenue fell 20 percent to $163.8 million.

The results are similar to those of USA Today publisher Gannett Co Inc (GCI.N) and Miami Herald publisher McClatchy Co (MNI.N). The market is waiting to see if The New York Times Co (NYT.N) will report like results on Thursday.

Revenue is still falling as advertisers spend more money to chase people online, and several U.S. newspaper publishers are flirting with defaulting on their debt. Some, including Tribune Co TRBCQ.PK, have filed for bankruptcy.

Many newspaper stocks, trading close to their historic lows, rallied on Media General's results on Wednesday.

McClatchy rose as much as 58 percent to $1.17. St. Louis Post-Dispatch publisher Lee Enterprises (LEE.N) jumped as much as 42 percent. Gannett shares climbed 9 percent and The New York Times rose 2 percent.

CONFIDENCE VS. THE ABYSS

Recent results coupled with a possible easing of the recession are giving publishers confidence to tell shareholders that they might not be staring into the abyss anymore.

"While we are still dealing with the recession, we are optimistic about our long-term prospects," Media General Chief Executive Marshall Morton said in a statement.

Media General plans to remain in compliance with its debt terms, Morton said, adding that it plans "slight reductions" in its $711 million in debt by the end of the year.

The company saw its classified ad declines "abate somewhat" compared with the first quarter of 2009, mostly in vehicle ads in its Florida, Virginia and Alabama markets. The company said retail ad declines also were less severe.

Classified ad revenue fell 35.2 percent, with job ads in some metropolitan markets down 63 percent and real estate down 55 percent. Auto revenue declines were better than some publishers have recently reported, falling only 27 percent.

Much of the profits that publishers are reporting come from painful cost cuts, including the layoffs of thousands of newspaper and TV station employees.

Media General's second-quarter operating costs fell 23 percent, driven by layoffs, furloughs and benefit cuts.

Broadcast profit fell 24 percent to $11.3 million, mostly because of lower political ad revenue.

Last year, Media General posted a $532.1 million writedown, which many newspaper publishers were forced to do after determining that the values of their brands and other properties had fallen as newspapers' survival seemed increasingly in doubt.

Media General shares were up $2.36 to $4.71 in midday trading on the New York Stock Exchange. (Reporting by Robert MacMillan; Editing by Jeffrey Benkoe, Brian Moss, Tim Dobbyn)