Investors dial back in to R.H. Donnelley stock, sending shares up 28%

Cary, N.C. — Shares in yellow pages and Web search firm R.H. Donnelley (NYSE: RHD) soared more than 29 percent in trading Thursday even though the company reported a $1.6 billion loss for the first quarter.

RHD stock has been hammered in recent months due to a slowing economy and uncertain prospects for traditional yellow pages advertising as well as the departure of the firm’s Web division (Business.com) top executive. RHD also declined to pay a dividend, which Wall Street had expected.

After falling some 90 percent in value, however, RHD stocks began to rebound on Tuesday after a competitor – Idearc – reported positive sales results. Shares jumped more than 25 percent. On Thursday, RHD surged in mid-day trading by $1.83 to $8.21.

Fo the day, RHD closed up 28 percent, or $1.82, at $8.20.

Before announcing earnings, RHD received a boost when an analyst at Deutsche Bank upgraded the stock to “hold” from “sell” with a target price of $6. The analyst said he expected the company to refinance debt and perhaps unveil an “equity offering.”

RHD said Thursday it would in fact restructure its debt. The reported loss also was for a “good will impairment.” Revenues actually increased 2 percent from a year earlier to $675 million, and excluding the write-down RHD made a profit of 17 cents a share. That met analysts’ expectations based on a poll by Thomson Financial.

"We generated strong revenues in the quarter driven by the pull through of ad sales from the prior year, lower claims and allowances and the addition of Business.com. This resulted in solid EBITDA in the quarter. Ad sales, a leading indicator of revenues, reflected weak economic conditions in our markets as we expected," said David Swanson, chairman and chief executive officer of RHD. "We are aggressively managing costs in response to this operating environment."

The cost management efforts including cutting of some 400 jobs, a company spokesperson told The News & Observer in Raleigh, N.C.