Gannett Co., Inc. (GCI): A Publishing Company with Strong Potential

Gannett Co., Inc. (NYSE:GCI) recently announced a big move that attracted a lot of investor attention. This move will broaden the company’s diversification and improve its revenue potential. But that doesn’t necessarily mean it’s the best option in the publishing space.

Gannett’s acquisition

Gannett Co., Inc. (NYSE:GCI) investors have enjoyed large gains over the past several years, yet the short position on the stock has remained high — currently 9.50%. The most likely reason for this elevated short position is the expected decline of the publishing industry due to free content being available online. For bears, it was only a matter of time before the stock began a precipitous decline due to a dying industry.

However, Gannett Co., Inc. (NYSE:GCI) is a well-managed company that has been around for over 100 years; it wasn’t going to sit back and allow for a slow death. This is a company that has seen many challenges throughout its history, including The Great Depression, World War II, and The Financial Crisis of 2008/2009. After dealing with such trying events, it unlikely an industry decline would be the final nail in its coffin.

Instead, Gannet announced that it would acquire Belo Corp (NYSE:BLC), the owner of 20 television stations. The deal is expected to close at the end of the year. In most acquisition stories, the acquiring stock drops (due to costs) and the stock being acquired jumps. That’s not what happened here as the chart below shows:

GCI data by YCharts

In the first quarter, Gannett Co., Inc. (NYSE:GCI)’s ad revenue declined 4.5%, mostly because advertisers throughout publishing industry have been hesitant to make any large commitments due to economic uncertainty. Rather than hoping for the economy and industry to improve, Gannett purchased Belo Corp (NYSE:BLC), and it now has a much larger presence in broadcast media — 43 television stations opposed to 23.

Broadcast media is a growing industry with high margins, which is what makes this move look so strategic for Gannett. After just one year, Gannett Co., Inc. (NYSE:GCI) expects the acquisition to add $0.50 to its annual earnings.

Few thought a deal like this could take place,  but recent insider buying for Gannett could have been a clue.  Now this information didn’t predict an acquisition, but consistent insider buying almost always leads to stock price appreciation over the short term. But that’s hindsight; let’s look ahead.

Gannett vs.

The New York Times Company (NYSE:NYT) might be a more recognizable name than Gannett Co., Inc. (NYSE:GCI) for most people, but it’s not a bigger company. Currently, Gannet has a market cap of $5.64 billion, and The New York Times Company (NYSE:NYT) has a market cap of $1.61 billion.