It’s good on paper

Newspapers finally have some good news.

With media and ad execs optimistic that the worst of the downturn is behind them, investors are beginning to bet again on one of the most beaten-down sectors of the business.

Newspaper bellwether Gannett, publisher of USA Today, kicked off a rally in newspaper stocks yesterday by issuing a surprisingly upbeat forecast for the third quarter. Gannett shares jumped 18 percent, or $1.76, to close at $11.74.

A number of newspaper publishers have said they expect the second half of 2009 to look better — or less awful — than the first half. More broadly, analysts say ad spending should begin picking up somewhat in 2010, thanks in part to the return of the Winter Olympics and the FIFA World Cup.

But while the ad market is showing pockets of relative strength, plenty of doubts remain about the chances for a recovery any time soon. And, there are questions about whether cost-cutting can sustain profits in the meantime.

While analysts have been cautioning investors to keep their enthusiasm in check, investors piled into other battered newspaper stocks. The New York Times Co. climbed 40 cents, or 5 percent, to $8.39. Lee Enterprises soared 89 cents, or 42 percent, to $3.03, while McClatchy Co. was up 15 cents, or 6 percent, to $2.65.

Earlier this month, TNS Media Intelligence, which tracks media expenditures, said US ad spending declines were moderating but attributed that largely to the fact that companies are facing easier year-over-year comparisons after several quarters of steep declines.

Yet investors believed the report reinforced upbeat pronouncements from a number of media executives. For instance, News Corp. Chairman Rupert Murdoch told investors that the ad spending situation is “getting better every week,” while CBS Corp. chief Les Moonves said demand for TV time sold on the spot market is getting stronger. (News Corp. owns The Post.)

Excluding one-time items, Gannett said profit will be 39 cents to 42 cents a share – topping the consensus estimate of 29 cents — when it reports the results Oct. 19.

“The quarter looks like another meaningful expense beat,” John Janedis, a Wachovia Capital Markets analyst, wrote in a note to investors. “Gannett continues to manage the expense side of the business well.”

Ad revenue remains a challenge for newspaper publishers. Gannett said its revenue for the third quarter will be $1.31 billion to $1.32 billion — below the average estimate of $1.38 billion and 20 percent less than what Gannett reported in the same period a year ago. holly.sanders@nypost.com