High-yield bond analysts Bishop Cheen (pictured) and David Hebert at Wells Fargo Securities track five radio companies. From their vantage point, Q1 is looking pretty good.
Although Gannett kicks off the Q1 reporting cycle for media companies next week and Journal Communications will deliver the first look at radio revenues, the pure play radio companies don’t start reporting until next month. But most will be entering 2011 with momentum from a strong Q4 and don’t have to deal with the feast or famine impact of elections, Olympics and the Super Bowl like their TV brethren.
Cheen and Hebert are projecting that radio revenues for those five companies will be flat to up 5.6%. That top performer is Salem Communications, which has been growing it social media assets as well as its radio stations, although expenses are growing to that 5.6% revenue gain is expected to produce a 0.6% decline in EBITDA.
LBI Media (Liberman Broadcasting) is expected to grow pro forma revenues 4.5% and EBITDA 22.9%. CC Media Holdings, the parent of Clear Channel, is seen as growing revenues 3.9% and EBITDA 0.1%. Entercom is projected to grow revenues 2.1%, producing flat EBITDA.
The laggard is Radio One, which had indicated in its Q4 earnings call that the year was starting slow. The Wells Fargo analysts are expecting the company’s Q1 revenues to be flat and EBITDA as well.
For the radio industry as a whole business has been improving, but Cheen and Hebert are still cautious in their advice to high-yield debt investors: “Following a 6% top line recovery in 2011, the industry is still suspect in terms of growth — most of the gains were driven by national ad spending, which contributes less than 30% of total industry ad spend, while local advertising (70% of industry revenue) was flat. Companies continue to deleverage their balance sheets to become more stable and more free cash flow positive. For 2011, we foresee (i) a stable advertising outlook, as radio continues on a low-growth trajectory this year, (ii) sustainable cost-cutting actions taken in the prior two years helping bolster margins, (iii) strong free cash flow characteristics still inherent in the industry due to moderate capex and de-levered balance sheets, (iv) the potential for consolidation this year, (v) secular pressures from Internet and satellite radio and (vi) a lack of incrementals to diversify away from volatile ad spending.”
RBR-TVBR observation: These guys aren’t pessimists, but they do point out that radio isn’t back to the go-go years and even the recovery is only going to produce low growth for the time being.
RBR-TVBR note: Coming in the next issue of Manager’s Business Report Click here to opt-in Bishop Cheen shares lots of valuable insights and sparks some interesting discussions.
RBR-TVBR note: For more on the fast-changing world of broadcast financing and deal making, you’ll want to check out the 6th Annual RBR-TVBR Financial Roundtable, coming in the next issue of Manager’s Business Report. Click here to opt-in.
6th Annual RBR-TVBR Financial Roundtable
The world of broadcast financing is changing rapidly as M&A activity is finally picking up in 2011. Our expert panelists provide illumination of the latest trends and make some predictions in this annual update. You won’t find a more informed group:Key participants in the 6th Annual RBR-TVBR Financial Roundtable are:
Jack Messmer, Executive Editor, RBR-TVBR
Bishop Cheen, Managing Director, Wells Fargo Securities
Kristin Allen, Managing Director, Credit Suisse
David Abraham, Managing Director, DAC Media Capital
Drew Marcus, Managing Partner and Portfolio Manager, Sugarloaf Rock Capital
Valuable ‘Audio’ to listen and learn coming in the next issue of Manager’s Business Report – receive MBR now Click here to opt-in.