Gannett forecasts earnings beat

By Paul Thomasch and Robert MacMillan

NEW YORK (Reuters) - Gannett Co Inc (GCI.N) forecast stronger-than-expected quarterly results, sending shares up nearly 19 percent, as cost cuts helped the largest U.S. newspaper publisher soldier through a tough ad market.

The announcement, which comes three weeks before Gannett plans to report third-quarter financial results, is rare for a U.S. newspaper publisher, and comes on the same day that the company said it was raising $400 million in debt.

The anticipated results pleased Wall Street, which scooped up newspaper shares that have been battered in recent years as investors bet that print newspaper publishers face a bleak future in the 21st century wired world. It also forced traders who sold short the company's shares to cover their positions, which pushed the share price even higher.

Still, the bright earnings report was the result of severe cost cuts. Advertising sales, the lifeblood of newspaper revenue, remain weak, leaving the companies in the unenviable position of trying to find more ways to cut costs to keep pleasing Wall Street.

Gannett's forecast suggests that newspapers' third quarter results may look much like the second quarter when publishers counted on slashing jobs, salaries, travel and every other expense to scrape together better-than-expected profits.

"Gannett beat the number by a yard, all on cost-cutting," said Benchmark Co analyst Ed Atorino. "Revenues are disappointing."

Investors bought newspaper stocks on Tuesday, hoping for more positive profit surprises. New York Times Co (NYT.N) rose 10 percent, McClatchy Co (MNI.N) climbed 9 percent, and Lee Enterprises (LEE.N) jumped 55 percent, making it the top performer in the Standard & Poor's 500.

Gannett in October plans to report a third-quarter profit of 39 cents to 42 cents a share, excluding items, compared with the 29 cents a share that analysts polled by Reuters Estimates forecast.