The nation's largest newspaper chain, Gannett Co. (GCI), said Tuesday that its third-quarter earnings would far exceed expectations on Wall Street, bolstering newfound optimism that a recovery is underway for traditional media outlets.

Following the announcement, shares of Gannett rose as much as 20% to $11.99, nearly 6.5 times the stock's low set in March. Shares of other major broadcasters and newspaper publishers also rose, as those stocks continue to recover from the dire predictions that pervaded the industry earlier this year due to the recession and growth of digital media.

Still, concerns remain over the USA Today publisher's ability to sustain its rebound as an aggressive round of cost-cutting is a key source of the company's bottom-line strength. Gannett expects revenue results for the quarter to be down about 19%, missing analysts' estimates.

"Our continued efforts to achieve efficiencies and further consolidations company-wide along with significantly lower newsprint expense resulted in another substantial decline in our operating expenses," said Gracia Martore, the company's chief financial officer.

Martore is filling in for the company's chief executive, Craig Dubow, who is on extended medical leave to recover from back surgery. Over the summer, Gannett unveiled plans to cut 1,400 jobs from its work force of 41,500.

For the third quarter, Gannett now expects to report earnings excluding restructuring charges between $93 million and $100 million, or 39 cents to 42 cents a share. That marks a decline from the 76 cents a share a year ago, excluding charges, but it far surpasses the mean estimate of analysts surveyed by Thomson Reuters for earnings of 28 cents a share.

John Miller, portfolio manager with Ariel Investments LLC - Gannett's largest shareholder - said the company's guidance is a sign that print and broadcast media are recovering from the depths of the recession.

"This company was priced to go out of business," said Miller, noting that the stock has more than tripled since Ariel doubled its stake in April. "We think there is more upside here as advertisers return to the market."

Gannett shares recently rose 18.7% to $11.85. Also jumping Tuesday are New York Times Co. (NYT), up 6.4% to $8.50; Washington Post Co. (WPO), 3.3% to $468.04; McClatchy Co. (MNI), 6% to $2.63; E.W. Scripps Co. (SSP), 8.2% to $7.79; Media General Inc. (MEG), 12.6% to $8.89; and Lee Enterprises Inc. (LEE), 48.1% to $3.17.

While the media industry has been flooded with chatter about a pick-up in advertising spending, a rebound has yet to materialize in the revenue of major media companies, and Gannett's third-quarter results will do little to change that. The company said it expects to report quarterly revenue between $1.31 billion and $1.32 billion, while analysts, on average, had expected revenue of $1.38 billion.

"Everything that we're hearing and reading indicates that a lot of advertisers are coming back into the marketplace," Miller said. "It's just a matter of time before this advertising has a positive impact on the revenue numbers."

Martore said advertising declines continue to get smaller, with the third-quarter's year-over-year decline expected to improve from the one-third tumble seen in the first half of 2009. Specifics for the third quarter weren't provided, and the newspaper industry continues to grapple with long-term declines as its online revenue gains are outpaced by its offline declines.

Underscoring the challenges still facing Gannett, the company said it expects third-quarter operating cash flows between $241 million and $252 million, which will mark a 22% decline from last year's $324 million. Last year's results showed a 29% drop-off from the previous year.

The trend doesn't bode well for Gannett's ability to meet its long-term obligations if newspapers continue to suffer declines, but its short-term credit concerns were alleviated by Tuesday's report.

The company said it cut its total debt in the quarter by $200 million to $3.31 billion. It expects its senior leverage ratio under its credit agreements to be more than 10% below the required ceiling set by its lenders - its nearest term credit risk.

Gannett has no debt maturities for nearly two years after aggressively restructuring its debt following the financial crisis. The process continued Tuesday as it also announced plans to sell $400 million in five- and eight-year notes, joining the raft of companies raising fresh capital to pay off other debt.

In July, Gannett swung to a second-quarter profit amid aggressive cost cuts, but operating results continued to weaken sharply.

"We do want to make sure that Gannett's not sacrificing quality with these cost cuts, but, so far, we feel that's not the case," Miller said.

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

(Mike Barris and Kevin Kingsbury contributed to this article.)