TV, newspaper stocks rise as investors bet on ad rebound

(Reuters) - Stocks of U.S. television broadcasters and newspaper publishers rose on Monday, bucking declines elsewhere in the markets, as investors hoped that advertising declines that have battered media stocks might be easing.

Shares of EW Scripps Co, which publishes The Commercial Appeal in Memphis, Tennessee, and owns other daily newspapers and local TV stations, were up 10 percent at $3.81. Dallas-based TV station owner Belo Corp was up 13 percent at $2.92.

Other local station owners and newspaper publishers saw strong gains on Monday, following similar rises last week.

New York Times Co shares rose 69 cents, or more than 10 percent, to $7.35, while Milwaukee Journal Sentinel owner Journal Communications were up more than 8 percent to $2.32.

USA Today owner Gannett Co Inc saw shares climb more than 9 percent to $6.35, while Miami Herald and Sacramento Bee publisher McClatchy Co's shares climbed 11 percent to $1.30.

While several more publishers, including Lee Enterprises and The Washington Post Co, are yet to report their results, it seems clear from the ones that reported so far that ad declines -- while severe -- might be starting to pull back from their disastrous levels in recent months.

At the same time, these companies have largely beaten profit expectations, but only after cutting costs by at least 20 percent. Revenue, particularly with publishers, often has missed expectations, indicating that they have not figured out how to update their business models for the Internet age.

Nevertheless, the market has reacted well to the cost cutting, and more could be on the way.

"We anticipate that the pure-play broadcasters will demonstrate similar trends, causing most stocks to go higher," Wells Fargo Securities analyst Marci Ryvicker wrote in a note to clients.

One publisher that reported on Monday, Dallas Morning News owner AH Belo Corp, reported a quarterly loss, but mollified the market by saying that it was still in compliance with the terms of its lending agreements for its debt.

Newspaper publishers have been battered by advertising revenue declines, even as many of them face hundreds of millions of dollars in debt that they took on several years ago when they were much more valuable companies.

Some publishers, including Tribune Co, have filed for bankruptcy, and others including The New York Times Co have been forced to resort to tough financial juggling to avoid getting into territory where they might default on their debt.

These problems accompany larger questions about the future of the business of news reporting and whether a viable, sustainable business model exists.

In the meantime, investors have bid up newspaper stocks in the past few weeks as companies such as Gannett and Media General Inc reported better-than-expected profits because of big cost cuts, including layoffs.

"I think that the market is saying that the threat of imminent bankruptcy is pushed back, and maybe it's pushed back a lot," said Benchmark Co analyst Edward Atorino.

Some investors think that "maybe we're seeing the beginning of the end of the (advertising) decline," Atorino said. "Things are not going to get worse from here, but they may not get a lot better," Atorino said.

(Reporting by Robert MacMillan in New York and S. John Tilak in Bangalore; Editing by Saumyadeb Chakrabarty)