Why Gannett Shares Plunged

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What: Shares of newspaper publisher Gannett (NYS: GCI) sank as low as 10% on Monday after its quarterly results disappointed Wall Street.

So what: The publisher of USA Today saw its first-quarter profit drop 25% as advertising revenue continued to decline, triggering fresh concerns over Gannett's place in the ever-increasing digital world. The stock has risen nicely over the past six months on successful cost-cutting initiatives and decent online revenue growth, but today's news suggests that the secular headwinds facing management are just too strong to combat.


Now what: Despite the short-term blip, management remains focused on the long-term. "We expect to see returns on our strategic initiative investments as the year progresses and for many years to come," said CEO Gracia Martore. "We are squarely focused on leveraging the iconic brands, local connections and financial strength that differentiate our business to implement our growth plan while returning $1.3 billion to investors by 2015." Given the alarming trend of declining revenues, earnings, and margins, however, I'd require a much larger margin of safety before buying into that optimism.

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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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