Gannett shares tumble on dropping newspaper revenue

NEW YORK (Reuters) - Gannett Co Inc, the nation's largest newspaper chain, dashed hopes that newspaper advertising revenue would stop falling and that growth might even return.

Shares of Gannett fell as much as 11 percent on Friday after the company reported a drop in third-quarter newspaper revenue.

"I think people were getting excited about a strong start to the fourth quarter and I don't think based on the numbers that Gannett reported or what they said about the fourth quarter on the print side confirmed that," said Doug Arthur, an analyst with Evercore Partners.

A bellwether of the newspaper industry, Gannett's results could point to more uncertainty in the sector. The New York Times Co, McClatchy Co and Media General are set to report earnings next week.

"Certainly on the newspaper side it's not coming back as strongly as I hoped," said Michael Kupinski, an analyst with Noble Financial.

Gannett reported publishing revenue declined almost 5 percent to $969.4 million, including a drop of 5 percent in advertising revenue to $646.7 million.

At its U.S. publishing division, which includes USA Today, advertising revenue decreased about 3 percent on weakness in the retail category.

Gannett executives declined to say how advertising revenue at its newspapers is shaping up for the fourth-quarter.

"On the publishing side, it's really too early to say," said Gannett Chief Financial Officer Gracia Martore during a conference call with analysts and investors.

At USA Today, paid ad pages totaled 495 compared with 493 during the year-ago period. Gannett said that automotive advertising was especially strong at the national newspaper but that restaurant, packaged goods and pharmaceutical advertising lagged.

Troubles persisted at Newsquest, the company's United Kingdom newspaper division. Advertising revenue there declined about 7 percent.

Total revenue was unchanged at $1.31 billion, missing analysts' forecast of $1.33 billion.

Gannett, which also owns TV stations, said broadcast revenue rose 22 percent to $185.3 million. The company estimated that TV ad revenue would rise in the mid to high 20 percent range in the fourth quarter.

Digital revenue increased 10 percent at its U.S. newspaper properties.

Third-quarter net income was $101.4 million, or 42 cents per share, compared with $73.8 million, or 31 cents per share, for the same period last year.

Excluding items, Gannett earned 52 cents per share, beating the 50 cents per share estimated, in average, by analysts, according to Thomson Reuters I/B/E/S.

Shares of Gannett were down 8.3 percent at $12.92 in early afternoon trade.

(Reporting by Jennifer Saba; editing by Gerald E. McCormick, Steve Orlofsky and Phil Berlowitz)