Analysts accent positive in radio, TV biz

Viacom and a host of U.S. radio companies got a much-needed vote of confidence Thursday as a handful of Wall Street seers got bullish on broadcast as the fall season approaches.

Prospects of a radio recovery in particular provided a helpful boost to broadcast stocks the day after a court ruling put Federal Communications Commission deregulation efforts in limbo.

Merrill Lynch, in an extensive re-think of the fortunes of downtrodden radio stocks, on Thursday issued a report that forecasts a turnaround in the sector. The bank upgraded its ratings to “buy” on Radio One, Emmis Communications, Lamar Advertising and Entercom, which helped boost Infinity Radio parent Viacom as well.

Emmis picked up more than 12% in trading Thursday to close at $23.90, while Viacom added 61¢ to close at $46.43 (up 1.3%).

“Current radio trends continue to suggest that radio advertising growth is slowly recovering and that month-to-month trends should improve from September forward,” Merrill analyst Marc Nabi said Thursday in a note in which he upgraded the bank’s position on the radio sector to positive in anticipation of politics- and Olympics-induced momentum in 2004.

Merrill Lynch and other banks seem confident that a cyclical recovery is well under way and will be able to boost even the severely depressed radio market.

Nabi believes radio could be a trickle-down beneficiary of the booming network TV business, which enjoyed a 15% boost in upfront commitments over 2002 to take in $20 billion. If the low level of cancellations continue, advertisers squeezed out of the TV market as scatter is consumed will be left to scramble for TV station spots and radio.

The current holdup on media ownership reg relaxation notwithstanding, Merrill expects another round of consolidation among radio groups. Clear Channel, the current market leader with an 18% market share, and Viacom (11%) are considered the most likely initiators of any dealmaking.

Wall Street has been broadly upbeat about ad-dependent Viacom’s fall prospects, thanks to media buyers’ comfort with the upcoming CBS primetime sked. L.A.-based analysts at Sanders Morris Harris, which surveyed leading buyers, noted Thursday that the Eye has the highest number of new or returning series for the fall, including the “CSI” franchise and “Everybody Loves Raymond.” Many skeins are expected to meet or exceed their upfront guarantees for the October-December period.

Bank also said CBS has sold 90% of its current commercial load for the upcoming portion of its National Football League contract, with pricing 5%-7% above last year.

Viacom sources would not confirm or comment on the forecasts.

CBS certainly is standing on strong footing. Thanks in part to “Big Brother 4,” the web finished first among total TV households, with seven of the top 10 shows for the last week of August. However, CBS finished second among adults 18-49 and is down 2.9% season-to-date, according to research out this week by Credit Suisse First Boston.

Overall, the bank is not expecting any pullback from advertisers in the near term.

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