Warburg Securities gives Gaylord a big thumbs-up

S.G. Warburg Securities initiated coverage of cable programmer Gaylord Entertainment Co. with a “buy” recommendation.

In a research summary, Warburg analyst Lisbeth Barron says Gaylord’s family-oriented programming is “in great demand” and the company’s management experience and ownership of 49% of the stock “augurs well for strong commitment to building businesses.”

Barron believes the company’s Nashville Network and Country Music Television represent great growth opportunities in their own right and notes that additional networks can be created under a very low cost structure.

International twang

As significant as the prospects are for the company in the United States, she says the international marketplace is beginning to demonstrate even more potential for Gaylord’s television programming. Barron says country music, in particular, is considered unique to the U.S.; along with music in general, it has been able to cross all language barriers. She says that a pending five-year rollout of CMT in Europe and the Far East is still only in its infancy, but is meeting with great demand.

Barron forecasts that Gaylord’s earnings will grow at an average of 30% annually over the next three to five years. Its price/earnings multiple on 1994 income is at parity with this growth rate, compared to other media and entertainment companies commanding premiums of 20% to 80%. Barron says the company’s closest peers — Turner Broadcasting system and Viacom — are at the upper end of this range.

Barron is targeting a stock price of $ 50 a share over the 12 months, when she expects the company’s fundamental earnings growth to become more clear-cut and its assets to be better recognized.

Gaylord gained $ 1.875 to close at $ 42.625. Trading was fairly heavy with more than 21,200 shares trading hands, compared with average daily volume of 18, 000.