Gannett Cautiously Optimistic About 2011

Broadcast was the brightest of bright spots for Gannett in last year’s fourth quarter as the improving economy yielded substantial increases in revenues, cash flow and operating income. (See related story.)

Political spending and retrans revenues get most of the credit for the increases, as core advertising spending, up 1.2%, was effectively flat, company executives noted during Monday morning’s earnings conference call.

Political advertising totaled $52.4 million for the quarter, helping push operating income for Gannett’s broadcast segment up 50%, exceeding operating income for the fourth quarter of 2008, a presidential election period.

Retrans revenues, up 15.9% to $16.4 million for the quarter, also were key in boosting the broadcast segment.

For the year, retrans revenue totaled $63.3 million. Gracia Martore, president-COO, said the company is projecting retrans revenue to hit $75 million in 2011. That would be about an 18.5% increase.

“We have a number of agreements coming up in the years after that so we feel very good about where we’re positioned on the retrans front,” Martore said.

Meanwhile, while cautiously optimistic about the economy, Gannett sees “headwinds” for the broadcast segment in this year’s first quarter keeping revenue in the “very low single digits” compared to the similar period last year.

Drags on revenue include lack of ad revenue associated with Winter Olympics, Super Bowl and political advertising.

While looking forward to the double bump in 2012 from Olympics and the presidential election, company executives were guardedly optimistic about the coming year.

“I think the economy has continued to be a little bit of a conundrum,” Martore said. “There are some signs things are picking up more than it appears in the marketplace. But there’s still a lot of uncertainty surrounding the economy.”

She noted specifically potential state and municipal bankruptcies. “We’ve never seen an economic recovery that goes in a straight line,” she said. “We’ll see how the economy zigs and zags in 2011.”

Wachovia securities analyst Marci Ryvicker paints a brighter picture of the 1Q than the Gannett executives do.

Based on her analysis of the Gannett earnings, core TV revenue (excluding the political, Olympic and Super Bowl) will be up more than 19% in 1Q. Even when the core revenue is adjusted for the fact that large portions of the non-core revenue is not incremental, it will grow between 9% and 12%, “which is very strong.”