July 22 (Reuters) - A decline in newspaper advertising dragged down Gannett Co's second-quarter results, underscoring the company's need for new revenue streams.
Higher broadcast, digital and subscription revenue could not offset newspaper advertising declines, which kept total revenue flat at $1.3 billion, below analysts' average forecast of $1.33 billion, according to Thomson Reuters I/B/E/S.
"Everything was disappointing and not as expected," said Edward Atorino, an analyst with Benchmark Co.
Shares of Gannett, the publisher of USA Today and 81 other newspapers in the United States, were down 1.4 percent to $25.98 in late-morning trading.
Gannett, the largest U.S. newspaper chain, is pushing heavily into broadcasting in an effort to boost revenue and margins - a trend that is in vogue with print publishers.
Last month the company said it would nearly double its broadcasting holdings by acquiring Belo Corp for $1.5 billion. And Tribune Co, publisher of the Los Angeles Times and Chicago Tribune, is buying 19 television stations from Local TV Holdings LLC for $2.73 billion.
Currently, broadcast revenue represents less than 20 percent of Gannett's total revenue. Advertising revenue at its newspapers has been falling steadily and shows no signs of improvement.
Several media conglomerates, notably News Corp, Time Warner and Tribune, are separating their print assets from their faster-growing, more profitable entertainment and broadcasting divisions.
Gannett CEO Gracia Martore said the company is focused on integrating Belo, but she did not rule out a spinoff of its newspapers.
"We are always looking at opportunities to increase shareholder value," Martore said on a call with analysts.
Gannett said revenue in the newspaper division fell almost 2 percent to $904.2 million in the second quarter as advertising sales dropped 5 percent.
Even its efforts to roll out digital subscriptions across its U.S. newspapers could not offset the advertising declines.
Broadcasting revenue increased 3.2 percent to $212 million, while digital revenue rose 3 percent to $186.5 million.
Gannett, which also publishes newspapers in Britain, authorized a new share buyback program of $300 million, expected to be used over the next two years.
"The buyback and Belo (TV stations) will give them room for growth," Atorino said.
Second-quarter net income fell 5.2 percent to $113.6 million.
Excluding special items, earnings per share were 58 cents, in line with analysts' average forecast.
Special items in the quarter totaled $35.7 million, including workforce restructuring charges.