Does Belo (BLC) Give Hope to Gannett (GCI)?

Newspapers are on borrowed time.

It pains me to say that as a former newspaperman myself. But at this point, the evidence is overwhelming.

So it’s no surprise that a newspaper stock like Gannett (NYSE: GCI) has been a bit underwhelming in its recent performance. Entering the day, shares had risen just over 7% year-to-date – underperforming the S&P 500 by roughly 3%.

That changed in a big way today. Gannett shares shot up 34% to $26.60 – a five-year high. The catalyst was the newspaper company’s $1.5 billion purchase of Belo Corp. (NYSE: BLC), a small-cap TV station based in Dallas. The move gives Gannett a strong digital presence, diversifying its product offerings away from a dying industry.  

The Belo purchase nearly doubles Gannett’s portfolio of TV stations from 23 to 43, and gives it stations in 21 of the country’s 25 largest markets. That should help counterbalance declining revenue in the company’s newspaper business. Gannett’s publishing revenue fell 3% last year, while its broadcast revenue increased 25%.

Right now, broadcast money accounts for just over one quarter of Gannett’s total revenue. After the deal to buy Belo, that number should rise – and should help keep the company afloat as other newspaper companies across the country fold.