GANNETT CO. INC. $56 (New York symbol GCI; Conservative Growth Portfolio; Shares outstanding: 234.9 million; Market cap: $13.2 billion; WSSF Rating: Above average) publishes 90 daily newspapers in 38 states, including USA Today, the nation’s most widely read newspaper. Other operations include over 1,000 non-daily community newspapers, and 23 TV stations. Gannett also owns 17 daily papers and over 300 non-dailies in the UK.

Gannett’s broad array of newspapers gives its Internet operations an edge over other news sites. In fact, its web sites accounted for about 15% of the U.S. Internet audience in January.

The company now plans to expand its online content by taking better advantage of the news gathering capabilities of its newspapers and TV stations. It will also look for acquisitions that enhance its web sites, such as last year’s purchase of a company that specializes in mobile phone search services.

Gannett earned $1.16 billion from continuing operations in 2006, down 4.1% from $1.21 billion in 2005. Per-share profits fell just 0.4%, to $4.90 from $4.92, due to fewer shares outstanding. Revenues grew 5.3%, to $8.0 billion from $7.6 billion, mostly due to acquisitions. If you exclude new businesses, revenue would have grown 2.1%.

Gannett’s cash flow crept up to $6.29 a share in 2006 from $6.24 a year earlier. But the company will probably spend just $0.90 a share on maintenance in 2007, which gives it plenty of flexibility to expand its operations.

For example, it just paid $73 million for two daily newspapers in Connecticut. Gannett plans to combine the printing and other administrative functions of these two papers with its existing operations in Connecticut.

The company will undoubtedly use some of its steady cash flow to buy back more stock. It spent $215.4 million in 2006 on buybacks, and still has $1.1 billion remaining under its current authorization.

Revenue growth will probably fall slightly this year, mainly due to the absence of political and Olympic-related advertising. Higher newsprint and interest costs will cut Gannett’s profit in 2007 to $4.70 a share. The stock trades at 11.9 times that figure. But earnings in 2008 should rise to $5.20 a share, which implies a p/e of just 10.8. The $1.24 dividend yields 2.2%.

Gannett is a buy.