There is a rare bit of good news for the newspaper industry this morning – and it’s a whopper!

Share prices across the downtrodden sector are soaring today thanks to word from Gannett (NYSE:GCI) that the company expects to handily beat its third-quarter earnings projections.

Gannett told its investors today to expect per share earnings (after one-time costs) in the range of 39 cents to 42 cents when the company releases its latest quarterly figures on October 19.

Before the press release, estimates pegged the figure at 28 cents per share.

Not surprising, the increase is not due to a sudden increase in subscriptions or advertising revenue. Instead, a reduction in paper costs and operational cutbacks are at work.

The news has sent shares of the $2.7 billion publisher up by more than 15%. Meanwhile, firms like the New York Times (NYSE:NYT) and Journal Communications (NYSE:JRN) are up by more than 5%.

But the industry’s big winner is Lee Enterprises (NYSE:LEE), with shares of the small cap soaring by nearly 60% on the bullish news.

Piggyback Profits

The high-flying action makes Lee an interesting stock to watch over the next few weeks, especially as third-quarter earnings figures begin to roll onto the Street.

With short-term debt of over $1.3 billion and a cash pile a mere fraction of its upcoming obligations, it is no wonder Lee’s shareholders are eager to sell at current levels. They may not get another shot.

If the company is to survive, it is going to spend a lot of time restructuring its current capital structure.

There is a good chance today’s optimistic news will be the catalyst that brings the company’s debt owners to the table in an effort to extend credit deadlines. It certainly helps to prove the newspaper industry is not dead just yet.

If you are thinking about making a move, don’t jump into the fire today. Wait for shares to give back some of the quick-found gains. More importantly, hold out for positive restructuring news or other material information.

Lee has a shot at success. Gannett’s news proves it is possible. But there is likely to be plenty of volatility ahead as the company fights to shed the dangerous weight of immense debt.

We got a rare bit of good news this morning. But will it become a trend? We’ll find out soon enough.

Source: No bailout Needed: Good News from The Rags

Ad revenues in the newspaper industry plunged 16.7% last year to $37.8 million r, according to the Newspaper Association of America (NAA). The 2009 take is estimated to fall another 17.3% to $31.6 billion according to Alan Mutter, a Silicon Valley executive who once lead the newsrooms of the Chicago Sun-Times and San Francisco Chronicle and now writes a blog titled “Reflections of a Newsosaur.”

Mutter’s estimate would put ad revenues at their lowest levels since 1965, when the industry took in $4.42 billion, or $30.22 billion when adjusted for inflation, the Columbia Journalism Review (CJR) reported.

While the worst economic downturn since World War II has eviscerated the fortunes of print media companies like The New York Times Co. (NYSE: NYT), The Washington Post Co. (NYSE: WPO) and Gannett Co. Inc. (NYSE: GCI), publishers will see secular decline in revenue even after the financial crisis subsides.

“Think, for instance, the classified ads business of newspapers, which has been walloped by eBay and craigslist (with a final indignity provided by the cyclical collapse of the housing bubble),” the CJR said. “Most of those revenues aren’t coming back. That’s a secular decline.”

The result of this decline means a “new reality” for publishers as they transition from the printed page to digital content. All the major publishers are online and have been for some time.

The New York Times’ Web site began in 1995, when the Internet was just starting to enter consumers’ homes. Ten years later in 2005, The Timestried its hand at a subscription-based model for its Web site, known as TimesSelect, a service that charged readers without subscriptions $50 a year for online access to editorial content.

According to The Times Co., TimesSelect had about 227,000 paying subscribers by August 2007. However, accessing the content for free were an additional 471,200 home delivery readers, as well as another 89,200 college students.

But the estimated 13 million readers who accessed the site that month, according to Nielsen/NetRatings reports, dwarfed those subscriber-users. The following month, the Times Co. gave up on TimesSelect and made the Web site free for all users in September 2007.

Since then, nytimes.com has soared to become the most visited newspaper site in the United States, with roughly 20 million unique visitors per month as of March. But The Times and other publishers are still trying to figure out how to generate revenue and turn a profit, especially now that the recession is cutting into advertisers’ budgets.

“As we continue our transition from a company focused primarily on print to one that is increasingly digital in focus and multiplatform delivery, online advertising revenues are a more important part of our mix,” said The Times Co. President and Chief Executive Officer Janet Robinson. “They made up 21% of our ad revenues in the quarter, up from 18% in the same period a year ago.”

Print and online ad revenue for U.S. newspaper publishers fell 29% in the second quarter from $9.6 billion to $6.82 billion, according to the NAA. Part of this stems from a cyclical decline in spending, while the rest comes from the “new reality” that people aren’t reading as many printed newspapers as they used to.

“This data represents a rearview mirror perspective on what we all know was a terrible stretch of bad road,” said NAA Chief Executive Officer John Sturm.

And the data comes even as online news audiences are growing: The latest data from the NAA shows online newspaper readership was 73.3 million users in the first quarter, a 10.5% increase from the 66.4 million the year before.

A Financial Fork in the Road

Publishers are hoping the decline in online ad spending is cyclical, but some aren’t waiting for the recovery to take advantage of the growing information-hungry audience and what they hope is an inevitable upswing in ad revenue.

News Corp. (Nasdaq: NWS) Chairman and CEO Rupert Murdoch has vowed to charge for all of the online content of his newspapers and television news channels, including The Wall Street Journal, the New York Post and Fox News.

Much of the content on The Journal’s Web site is available only through a paid subscription of $1.99 per week, and is one of the few newspapers to successfully charge for its content, in spite of a backdoor to view articles for free via Google Inc.’s (Nasdaq: GOOG) popular search engine.

“If successful, we’ll be followed by all media,” Murdoch told the Financial Times.

Murdock predicts “significant revenues” from charging for differentiated news online.

But differentiated news isn’t enough for people to pay for it, according to Google CEO Eric Schmidt.

“In general these models have not worked for general public consumption because there are enough free sources that the marginal value of paying is not justified based on the incremental value of quantity,” he said to a group of British broadcasting executives.

Murdoch is hoping The Journal’s online success will carry over to its mobile applications for devices like Research in Motion Ltd.’s (Nasdaq: RIMM) BlackBerry and Apple Inc.’s (Nasdaq: AAPL) iPhone. His company will start charging consumers to read stories via those apps “in one to two months,” he told Reuters last week.

Several news outlets already have either ad-supported mobile news sites or device-specific applications. The Times and The Journal have the No. 2 and No. 5-most downloaded apps in Apple’s App Store for iPhone, respectively. NPR News is the most popular app.

A “Digital Vampire” Becomes a Partner to Some Publishers

Google News, which aggregates stories from the all over the Internet, currently generates ad revenue from news searches and doesn’t share any of it with the news sites – a business model that clearly doesn’t sit well with publishers.

Earlier this summer, Les Hinton, chief executive officer of Dow Jones and publisher of The Journal described Google as a “digital vampire.”

Speaking at the annual PricewaterhouseCoopers LLP Entertainment and Media Outlook event, Hinton accused Google of “sucking the blood” out of the newspaper business, and vowed new developments would level the playing field.

“There is a charitable view of the history of Google,” Hinton said. “[It] didn’t actually begin life in a cave as a digital vampire per se.”

Instead, by offering content free on the Web, the newspaper industry “gave Google’s fangs a great place to bite,” he said. “We will never know what might have happened had newspapers taken a different approach.”

Now, Google is trying a new way to share its take and possibly change the way people read news on the Web with its “Fast Flip” experiment, unveiled last week.

The idea behind Fast Flip is to present newspaper and magazine Web sites like a print publication, and users can quickly “flip” top stories in a selected category or specific topic found via Google’s search.

Google will share revenue with publishers such as The Times. Co. and The Post Co., but specific percentages were not given.

“The publishing industry faces many challenges today, and there is no magic bullet,” said Google News researcher Krishna Bharat in a blog posting. “However, we believe that encouraging readers to read more news is a necessary part of the solution. We think Fast Flip could be one way to help, and we’re looking to find other ways to help as well in the near future.”

Source: ‘New Reality’ for Newspaper Publishers Forces Search for New Revenue Streams to Tap Into

• Abu Dhabi’s state-controlled International Petroleum Investment Company (IPIC) said it would buy a 9.1% stake in the German automaker Daimler AG (DAI) for almost $2.72 billion (2 billion euros). It also pumped $1.41 billion into Aabar Investment PJSC, giving the Middle East emirate majority control in the IPIC, Reuters reported.

• Tata Motors Ltd. (ADR: TTM) announced it will begin sales of the Nano, the world’s cheapest car. It will accept bookings for the new car from April 9 and April 25, and customers will have to pay full price (about $2,000) as a deposit, Bloomberg reported.

• Walgreen Co. (WAG) took reconstruction charges and spent more promoting nonprescription items in its second-fiscal quarter ended Feb. 28, leading to a profit of $640 million, or 65 cents per share. The earnings beat expectations, and Morningstar Senior Analyst Mitch Corwin told Reuters that he believes the company will “emerge from this downturn a better firm.”

• U.S. banks now face increasing loan delinquencies from owners of skyscrapers and shopping malls, as commercial property prices plummet. Commercial property prices are down almost 20% in the past year, and with the global recession worsening, there’s “significant stress” in the market, William Schwartz, a credit analyst at DBRS Inc. in New York, told Bloomberg. The country’s 10 biggest banks have $327.6 billion in commercial mortgages, which face a wave of defaults as office vacancies grow and retailers and casinos go bankrupt.

• Gannett Co Inc. (GCI) will force employees to take a new round of furloughs in April, May and June to save money as newspaper advertising revenue slides. Gannett was among the first U.S. newspaper publishers to furlough workers to cut costs as ad revenue sinks and people forsake printed papers to get free news on the Internet. The furloughs come after a one-week unpaid leave saved the company $20 million, according to a memo from a company executive obtained by Reuters.

• Oil prices hit their highest level in nearly three months yesterday (Monday) as a U.S. plan to purge banks of toxic assets triggered a rally on Wall Street, Reuters reported. U.S. crude rose $1.73 to settle at $53.80 a barrel on the New York Mercantile Exchange, after climbing as high as $54.05, its highest price since December 1. London Brent crude rose $2.25 to $53.47. Dealers said the bank plan could brighten the outlook for global business and consumer energy demand.

• TreeHouse Foods Inc. (THS), whose largest customer is Wal-Mart Stores Inc. (WMT), said the recession hasn’t stalled plans to make “substantial” acquisitions and reach $2 billion in sales in a consolidating private-label food industry, Bloomberg reported. The recession has spurred growth in  private-label goods from name brands as consumers look for ways to save money. Treehouse, whose roots trace back to Keebler elves, has gained 24% in the past 12 months, compared with a 39% drop in the Standard & Poor’s Smallcap 600 Index (IJR).

Source: Global Investment News Briefs Tuesday March 24, 2009

* The Conference Board said yesterday (Tuesday) that its consumer confidence index fell to 38 – the lowest level since the Conference Board began tracking consumer sentiment in 1967. The index registered a revised 61.4 in September, which makes this month’s drop the third-steepest drop on record. A year ago, the index stood at 95.2.

* The Standard & Poor’s/Case-Shiller 20-city housing index dropped a record 16.6% from August last year – the largest drop since its inception in 2000, The Associated Press reported. Prices in the 20-city index have plummeted more than 20% since peaking in July 2006, the group reported. The 10-city index tumbled 17.7% — the biggest decline in its 21-year history.

* The Organization of Petroleum Exporting Countries (OPEC) said yesterday (Tuesday) that it would continue to prop up the oil market and may call another meeting before the group’s next scheduled conference in December. “If circumstances dictate we have to have another meeting, we will have a meeting before the Algerian meeting,” OPEC Secretary General Abdullah al-Badri told Reuters.

* Whirlpool Corp. (WHR) said yesterday (Tuesday) it will eliminate about 5,000 jobs this year and next, as the U.S. economy continues down its path to recession. The nation’s largest home appliance maker said its earnings fell 7% in the third quarter.

* Despite a market deep in bear territory, Wall Street professionals still expect year-end bonuses. According to a survey by eFinancialCareers, a unit of specialty jobs site operator Dice Holdings Inc. (DHX), 67% of workers expect a bonus for 2008. But some companies, such as Deutsche Bank AG (DB) have already announced top executives would not receive bonuses for the year, Reuters reported.

* Credit Suisse Group AG (ADR: CS) and Deutsche Bank AG (DB) yesterday (Tuesday) both refused to provide financing for the $6.5 billion buyout of Huntsman Corp. (HUN) by a unit of Apollo Global Management LLC. The banks refused to fund the purchase of the chemical company because the combined company could prove insolvent, Bloomberg News reported.

* The 100-year-old Christian Science Monitor said yesterday (Tuesday) that it would stop printing a daily edition next year in order to focus on the Internet – becoming the first nationally distributed newspaper to do so, Bloomberg News reported. And in a related story, national newspaper publisher Gannett Co. Inc. (GCI) said it would cut 10% of the workers at its community newspapers – a move that follows a cut of 3%, or 1,000 jobs, back in August. The cuts should be completed by early December and don’t apply to USA Today, Gannett said. Gannett, which publishes 85 daily newspapers, recently reported that third-quarter revenue declined 9%, and said it would re-evaluate its dividend policy.

Source: Global Investing Roundups Wednesday, October 29, 2008

• British Airways PLC (OTC ADR: BAIRY), AMR Corp.’s (AMR) American Airlines Inc. and Iberia SA (PINK: IBRLF) announced yesterday (Thursday) that they were applying for European and U.S. antitrust immunity. If the three airlines receive the requested exemption, the three carriers will cooperatively set fares and share seats on transatlantic flights, BusinessWeek reported.

• Despite oil’s recent pullback, icon investor T. Boone Pickens feels crude will not drop below $100 due to the United States’ heavy dependence on foreign oil. “I don’t think it’ll drop below $100,” Pickens told Reuters yesterday (Thursday) in a telephone interview. “I would say $110 is where it might go, something like that.”

• Wal-Mart Stores Inc. (WMT) announced yesterday (Thursday) that net income increased 17% in its fiscal second quarter driven by bargain hungry shoppers hurting from high food and fuel prices. For the quarter ended July 31, Wal-Mart reported net income of $3.45 billion, or 87 cents per share, an increase from $2.95 billion, or 72 cents per share, for the same period in the prior year,
  The Wall Street Journal reported.

• Amusement park operator Six Flags Inc. (SIX) said yesterday (Thursday) that revenue in the third quarter through Aug. 12 was up 7.6%, or $23.5 million, from the same period last year, and included fewer operating days. Attendance grew 5.1%, or 407,000 people, to 8.4 million, the company said. Year-to-date, Six Flags said its revenue was up 6.1% from last year, representing an increase of $43.1 million.

• Gannett Co. Inc. (GCI) Inc will eliminate 1,000 positions from its local newspapers around the U.S. because of declining advertising and circulation revenue, Reuters reported. The company said the cuts equal about 3% of the positions in its Community Publishing unit.

• General Motors Corp. (GM) said yesterday (Thursday) that it would finalize the design of the all-electric Chevy Volt by mid-September and hopes to have 50 prototypes with production-ready parts by the end of 2008. GM plans to launch the car in 2010, Reuters reported.

• Estee Lauder Cos. Inc. (EL) said yesterday (Thursday) that net income hit $120.2 million, or 61 cents a share, in the quarter ended June 30, from $88.6 million, or 45 cents a share, a year earlier. Quarterly sales rose 14% to $2.01 billion. For fiscal 2009, the company said it expected earnings per share of $2.57 to $2.72 and net sales growth of 6% to 8%.

• Netflix Inc. (NFLX) has suffered a major disruption in its mail-service DVD rental business, The Wall Street Journal reported, that has prevented the majority of customers from receiving movies since Tuesday. Steve Swasey, a spokesman for California-based Netflix, described the cause of the disruption as a “pretty severe technical” problem with the company’s shipping system and could not speculate as to when the problem might be resolved.

Source: Global Investing Roundups Friday, August 15th, 2008

• Wells Fargo Co. (WFC) stock jumped 32% after the nation’s fifth largest bank raised its dividend by 10%, from 31 cents a share to 34 cents. The company reported second-quarter profit fell 22% as more customers defaulted on loans, but the dividend hike was enough to answer any questions concerning the company’s stability.

• Light, sweet crude for August delivery fell $4.14 to settle at $134.60 a barrel on the New York Mercantile Exchange yesterday (Wednesday) after sinking as low as $132 earlier in the day. Over the past two days crude prices have dropped $10 a barrel.

• The National Association of Home Builders/Wells Fargo housing market index fell in July to a record low of 16, down from 18 in June, the Associated Press reported. The index has been on a downward trajectory since May, as tighter lending standards, rising mortgage defaults and fear about the housing market’s future have sidelined buyers.

• Russian energy giant OAO Gazprom accused Belarus underpaying for gas deliveries and threatened to go to court if the situation is not rectified, Thomson Financial reported. “If the Belarussian side continues to fail to honour its obligations to pay in full for Russian gas, Gazprom reserves the right to start court proceedings,” Gazprom said in a statement.

• Shares of Gannett Co. Inc. (GCI), the largest U.S. newspaper publisher, tumbled yesterday (Wednesday) after the publisher announced a 36% decline in second-quarter profits from the same period the year prior, Bloomberg News reported. Shares shed 78 cents, a decline of 4.5%, to close at $16.57.

• Struggling Sprint Nextel Corp. (S) is an attractive takeover target for Korea-based SK Telecom Co. Ltd. (ADR: SKM). The two mobile carriers are a good technological fit and Sprint is hurting for cash, while SK Telecom is looking to expand its presence in the United States, BusinessWeek reported.

• Executives from Time Warner Inc.’s (TWX) AOL unit met with Microsoft Corp. (MSFT) yesterday (Wednesday) to discuss a possible merger. Microsoft is seeking alternatives after Yahoo! Inc. (YHOO) shunned its buyout bid. While the two firms have been in ongoing discussions for some time now, the chances of reaching a deal remain less than certain, MarketWatch reported.

• Delta Air Lines Inc. (DAL) stock jumped over 25% yesterday (Wednesday) despite announcing a $1 billion quarterly loss. The Atlanta-based carrier was profitable before special charges, Reuters reported, causing shares to gain $1.24 to close at $5.91.

Source:  Global Investing Roundups Thursday, July 17th, 2008

A Contrarian Strategy: Why Clear Channel Is Today’s Top Stock Pick
by Floyd G. Brown, Advisory Panelist, Investment U

One of the most profitable investments I have made came after a magazine headline hailed the coming bankruptcy of Philip Morris. It took nerves of steel to buy the lowly MO in those days. It was after the largest legal settlement in U.S. history disgorged Morris and other tobacco stocks of profits to pay the healthcare bills of the 50 different United States. Attorney General Janet Reno attacked the company in the newspapers as merchants of death.

But in the eight years since I first bought Philip Morris, at around $19 a share, I have been paid a king’s ransom. The stock has yielded over 10% annually. I’ve seen MO’s dividends rise. The company has given me shares of Kraft (NYSE: KFT), worth more than my original purchase price. It gave me shares of Philip Morris International (NYSE: PM) this month. And for the icing on the cake, I still own all my original shares of Altria (NYSE: MO).

Why am I telling you this?

Because it says a lot about headlines in the mainstream media. They almost always get the story wrong. In this case, they were trumpeting the potential bankruptcy of Philip Morris just when the stock was cheap enough to be a long-term buy and part of my overall contrarian strategy.

Contrarian Strategies: How to Find Wall Street’s Best Deals

When markets are hot, contrarian strategies go the other way, toward the cool spots. Contrarian investors prefer to skulk around in broken sectors looking for the next Philip Morris – the next company that will pay out handsomely to hold their stock because no one else will buy it.

That’s why I enjoyed the headlines around the recent collapse of the Clear Channel deal. This one appeared in Fortune magazine: “Clear Channel’s Prospects Look Grim.”

The article continues by telling us why the radio business is dead. Then, for good measure, it tells us why the newspaper business is holding on for dear life and why the TV business is at death’s door.

The article leads you to believe there’s simply no hope for the media business. And when there is no hope, I sense opportunity for a contrarian strategy.

Let me make a prediction…

• After I die (and I am only 47 years old) people will still listen to radio, they will still read newspapers and they will still watch TV.
• By the way, similar prognosticators said the same of the movie and radio businesses when TV was invented.
• They both still exist… even after the Internet has come along and led to the prediction of an end to all these businesses.
• These media businesses will not only change, but adapt.

The winds of Creative Destruction are blowing, as Joseph Schumpeter would say, but the best businesses adjust and change with those winds. Right now, I see remarkable value in the media space. So let’s look at the numbers instead of the headlines…

4 Media Firms To Consider In Any Contrarian Strategy

Clear Channel (NYSE: CCU), with its “grim prospects,” grew revenues 5.5% last year. How many businesses do you know of on the verge of disappearing that are growing revenue? Granted, the revenue from radio was shrinking – by about 2%. But Clear Channel has 870,000 billboards scattered across the landscape and this business is booming. New technology, which allows billboards to change messages by the minute, is powering a revival in display advertising.

The operating margins in this business are 25%. All Clear Channel has to do to see clear sailing ahead is do what the private equity buyers would do. They would slash expenses, besides selling underperforming assets. Then they would take the money, pay down debt, or give themselves a hefty dividend.

Now, how tough can that be? I expect that they could fetch $8 or $9 billion for the outdoor advertising business alone. That single transaction could pay every last dollar of Clear Channel’s debts. The reason private equity firms wanted Clear Channel is because they smell profits. At 15 times earnings, and with the best assets in radio, Clear Channel below $30 a share is a steal.

Other media firms I think deserve a look are:

• Gannett (NYSE: GCI),
• Citadel (NYSE: CDL),
• And Time Warner (NYSE: TWX).

As the Olympics and Election of 2008 draw closer, these firms will show increasing earnings and depressed growth will rebound.

Radio is a “drive time” phenomenon, and drive times are increasing on our already congested roads. All four companies own outstanding assets and should flourish in the Internet era. Major media firms own some of the best Internet assets besides having the ability to tailor the news to local interests.

When the markets turn, the oversold stocks of media firms are going to come roaring back with a vengeance.

Good investing,

Floyd

Floyd Brown, a regular contributor to Investment U and The Oxford Club, began his highly successful investing career while still in high school… and made his first million before turning 30. Here are five more of his energy picks.