Its revenue of late is largely fueled by its global advertising platforms in the digital space, with its legacy radio and television properties superserving U.S. Hispanics somewhat ancillary to the key dollar driver.
How will broadcast media compare to Entravision Communications‘ digital ad networks with respect to profit performance in Q2 ’22?
That answer will come on Wednesday, August 3.
Once U.S. financial markets conclude trading for the day, Entravision will release its second quarter 2022 results. This gives analysts and investors about an hour to digest the details, as company executives will hold an earnings call at 5pm Eastern to discuss the results.
With a 1-year target estimate of $13.50, Entravision — like many of its peers in the broadcast media space — has fallen short of analyst expectations with its stock price impacted by forecasts of a possible ad recession, and general economic volatility amid a probable recession.
The 52-week high for EVC is $9.34; the 52-week low is $4.21. In morning trading on July 25, Entravision shares were at $5.09.
For investors, there are benefits to owning EVC. First, there is a dividend, unlike some broadcast media companies. Then, there are the fundamentals — something financial blogger Simply Wall St. loves. In fact, it questions whether or not the market “could be wrong” about Entravision stock.
With its just-announced expanded digital partnership in Honduras and El Salvador with Meta, Simply Wall St. dismisses its short-term stock trend by noting, “If you pay close attention, you might find that its key financial indicators look quite decent, which could mean that the stock could potentially rise in the long-term given how markets usually reward more resilient long-term fundamentals.”
It puts a return on equity at 12%, similar to the industry average. But, why didn’t this translate to growth? “While the company’s earnings have been shrinking, the industry has seen an earnings growth of 1.5% in the same period,” Simply Wall St. discovered. “This is quite worrisome.”
With the decline in earnings “rather baffling” for the financial blogger, in total, “it does look like Entravision Communications has some positive aspects to its business. Although we are disappointed to see a lack of growth in earnings even in spite of a high ROE and and a high reinvestment rate, we believe that there might be some outside factors that could be having a negative impact on the business. With that said, we studied the latest analyst forecasts and found that while the company has shrunk its earnings in the past, analysts expect its earnings to grow in the future.”
The relation of broadcast media to its digital enterprises may be the biggest concern for investors. Even with digital now the biggest revenue generation engine for Entravision, foreign currency fluctuation in a recessionary environment could be seen as a potential weak spot; Entravision is not only active in Latin America but in nations such as Kenya.
For the three-month period ending March 31, Digital revenue increased to $153.71 million, from $101.48 million.
Audio division revenue, which includes the company’s radio stations and national radio unit, increased to $12.59 million from $11.31 million. The difference in revenue between the two divisions is striking. But, the audio division need not be concerned about foreign currency valuation shifts.
Meanwhile, the TV segment saw Q1 2022 revenue decline to $30.87 million, from $36.09 million. But, this likely reflects the exit by Entravision from Orlando, Tampa, and Washington D.C.
What can investors anticipate in the second quarter? CEO Walter Ulloa noted on Entravision’s Q1 call that the company saw some improvements in auto edge spend as the second quarter began. Thus, he believes auto advertising will continue to slowly improve throughout the year as inventory supply returns to meet demand. “Offsetting auto declines, excluding the three Univision appliances that we no longer operate, travel and leisure was up 141% compared to last year’s same period,” he added. “Telecom grocery retail and product brands also had strong growth in the first quarter compared to the prior year same period.”
And, auto advertising, though softer than the prior year, is trending better in the second quarter in Entravision’s audio unit.
This is good news, as Entravision’s audio segment is pacing plus 3% over the prior year period, with core audio excluding political, pacing at a plus 2%.
As of the Q1 2022 call, revenue from Entravision’s digital segment was pacing plus 34% over the prior year for the second quarter.
