Tuesday, September 29, 2009

Gannett Reverse Commodity Play?

Gannett (GCI) publisher of USA Today and many financially disastrous local newspapers announced better earnings and wowed the market creating a nice daily surge on a down market day. But wait read the numbers and think about the reasons. The price of newsprint is down so a major cost input has been reduced. Not sure how to follow newsprint prices (I am not really a commodities guy) but was there no way to figure that one out in advance. Was there any guidance from Gannett that was believable about newsprint costs that investors could rely on?

After you come off the newsprint high you see that top line revenue growth is still a very difficult story. Advertising is driven by the economy and the economy is 70% consumer. More when you consider local advertising. Chief Financial Officer Gracia Martore commented that publishing advertising continued to improve, with the year-over-year decline expected to improve from the one- third tumble seen in the first half of 2009. Specifics for the third quarter weren't provided.

If it’s still dropping it’s still ugly.