Gannett Co.'s (GCI) third-quarter profit tumbled 53% amid an advertising slump, but the newspaper publisher's results still beat raised expectations, helped by cost cuts.

The publisher of USA Today, which said late last month it expected third-quarter profit to exceed Wall Street's forecasts, surpassed that raised outlook. Concerns remain, however, about the company's $3.5 billion debt load, its sharp ad revenue declines and its ability to sustain a rebound through cost cuts.

The company's operating expenses fell 14% in the third quarter through job cuts, salary reductions and other measures. Meanwhile, publishing ad revenue dropped 28% compared to the year-ago period, when it fell 18%.

"Even though they were still down substantially, the ad revenue trend is improving, and the third quarter performance wasn’t as bad as I was expecting," Barrington Research analyst James Goss said. "It's continually impressive that Gannett is able to keep cutting back its cost base."

Shares of Gannett, which have risen more than five-fold in the past seven months, rose 7.3% to $13.95. The company's chairman and chief executive, Craig Dubow, who returned late last week from a four-month medical leave, said the company is seeing better trends in advertising.

"We see revenue trends moving in the right direction in our publishing segment," Dubow said during a conference call with analysts following the earnings release.

He also noted that a quarter of Gannett's debt outstanding now matures in late 2014 or beyond after the company raced to restructure its debt in the wake of the global financial crisis.

The company's chief financial officer, Gracia Martore, said Gannett's debt-to-earnings ratio was flat in the quarter, remaining well within the requirements set by its lenders, and she expects that metric to improve in the fourth quarter.

Gannett recently raised $500 million in new debt financing to pay down near-term maturities, and in the third quarter, it paid down $197 million in debt.

The company, which owns more than 80 daily newspapers, said its quarterly profit fell to $73.8 million, or 31 cents a share, from $158.1 million, or 69 cents a share, a year earlier. Excluding asset write-downs and restructuring costs, earnings fell to 44 cents from 76 cents. Gannett's September forecast, excluding restructuring charges, was 39 cents to 42 cents a share, above analysts' estimates at the time.

Revenue dropped 18% to $1.34 billion, better than Gannett's forecast for a weaker than expected decline of about 19%.

Publishing revenue dropped 24% while broadcasting reported a 23% decline. Gannett's broadcasting business, which includes a large stable of NBC-affiliated stations, faces new uncertainty as NBC Universal's owner, General Electric Co. (GE), holds talks with Comcast Corp. (CMCSA, CMCSK) about surrendering majority control over the media conglomerate to the nation's largest cable provider.

Analysts have said Comcast may be forced to sell NBCU's broadcasting stations due to regulatory restrictions, and some have raised the possibility that NBC could be transformed into a cable network. Dubow acknowledged that such a prospect does not bode well for Gannett and other affiliate owners. He also said NBC's decision to fill the last hour of prime-time on weeknights with a comedy show hosted by Jay leno in lieu of scripted programming has, so far, been a drag on Gannett.

"Right now, we would probably be in a little better position with the traditional" prime-time programming, Dubow said. "It's awfully early to tell at this point. Leno will give us some opportunities as we move forward."

In a sign of the challenges still facing Gannett on the print side, its national newspaper, USA Today, was unofficially surpassed by The Wall Street Journal as the largest U.S. newspaper by weekday circulation. After leading the industry in circulation for years, USA Today recently said it had slipped to about 1.9 million, while the Journal - which, like this newswire, is owned by News Corp. (NWSA) - said its circulation rose to 2.02 million. Official figures will be released Oct. 26.

Martore attributed circulation declines to hotel vacancies and a general slowdown in U.S. travel due to the recession. She also noted the company's newsprint expenses were down 43% in the quarter because of lower pricing resulting from a "sizable imbalance in supply versus demand" in the market, and she expects newsprint prices to remain under pressure into 2010.

-By Nat Worden, Dow Jones Newswires; 212-416-2472; nat.worden@dowjones.com

(Mike Barris contributed to this report.)