News Corp (NWSA), Gannett Co., Inc. (GCI), Reed Elsevier NV (ADR) (ENL): One Publisher to Buy and Two to Sell

Traditional publishers are dying. I know that’s no news flash, but how can an investor makes sense of it all? Essentially, print publishers are losing a considerable amount of advertising revenue because ads are now being placed online since that’s where readers are going. To make matters worse, most print publishers haven’t found a way to earn considerable profits on the web.

That means if you want to invest in publishers, you need to go with a firm that has a market niche in its print segment. It has to be the type of company that offers information that you can only get from its publications. Only one of the following firms meet that standard.

New Corp. is weakening with social trends

News Corp (NASDAQ:NWSA) controls two business segments, one in entertainment (consisting of 21st Century Fox, among others) and one in the news business (consisting of the Wall Street Journal, for example). Both the entertainment and the news segments are troubled. On one hand, an increasing number of people are turning off their TVs and using their computers to download and stream media for free. On the other, people are turning to web for information and damaging print publication profits by doing so.

As a former newspaper editor, I know firsthand that the industry is dying. Small community newspapers will survive due to the fact that local print is the only place to receive much of the news that townsfolk are craving, but News Corp (NASDAQ:NWSA) is mostly invested in larger news media. It should be noted that while the company has some assets in newspapers such as the Wall Street Journal, it is also heavily invested in Fox Sports Australia which isn’t as negatively affected by social trends.

While the company posted a loss last year, analysts believe that the firm will earn $0.55 per share this year and $0.52 per share next. If that proves true and the company is able to earn a profit, its share price will soar. Be wary of the long-term implications of buying a company heavily invested in news media and TV- and film-based entertainment, however.

Gannett improves operations, but has a long way to go

Gannett Co., Inc. (NYSE:GCI) looks to be in a better position than New Corp. since the company acquired Belo. The purchase represents further diversification away from a heavy investment in publishing while increasing the exposure to broadcast. I see advertisers preferring Internet ads over television, however, due to more people turning off their TVs and turning on their computers.

Management at Gannett Co., Inc. (NYSE:GCI) anticipate the purchase could generate $175 through synergies by 2016. Part of that anticipated synergy comes from the concept that the company will have higher bargaining powers with the content providers due to its newfound size, and this could lower royalty payments while increasing advertising rates.

Analysts don’t expect those synergies to take effect right away, however, and neither do I. Revenue is expected to fall 2.3% this year before gaining 4.9% next year. Those estimates are reflected in the earnings per share forecast, which is expected to drop 8% this year before climbing by 19% next year.