Wall Street cheered radio and live-event giant Clear Channel Communications Tuesday after the company topped expectations for its first-quarter earnings, excluding a hefty but expected $17 billion one-time charge related to a change in accounting rules.
Strong radio division results helped Clear Channel, which owns almost 1,500 stations nationwide, swing to a modest pre-charge profit of $90 million, compared with a loss of $309 million in the same period a year earlier.
Revenues for the quarter were up 4% to $1.7 billion. Cash flow, a closely watched barometer of financial performance for media companies, slipped to $370 million from $404 million last year, but was still ahead of the company’s $340 million-$360 million prediction.
The accounting charge, which Clear Channel predicted in February, relates to a change in rules governing the way companies write down intangible assets, like the premiums paid for acquisitions. Conglom has a lot of intangibles on its balance sheet, thanks in part to an aggressive buying spree in the six years following deregulation of the radio business.
Radio was clearly the bright spot on Clear Channel’s income statement. On a pro-forma basis, the division boosted revenues and cash flow by 2% and 3%, respectively, thanks in part to a regime of cost-cutting set into motion to fight the effects of a looming recession.
“The streamlining and planning put into place last year is very much starting to pay dividends,” prexy and operating chief Mark Mays said on a conference call.
The company’s outdoor advertising business didn’t fare nearly as well, as the dismal market for advertising in virtually all media took its toll on the billboard biz. Clear Channel Outdoor’s pro-forma revenues fell 11% for the quarter, while cash flow tumbled nearly 40%.
The company’s live-event arm, Clear Channel Entertainment, was a mixed bag, though Mays said the unit did better than expected given the dismal environment for live entertainment following the Sept. 11 attacks. Pro-forma revenues climbed 15%, but cash flow dropped 17%.
Music tours fared the worst among CCE’s first-quarter events, as terrorism curtailed the plans of many top artists, Mays said. Exec was optimistic about the balance of the year, with tours slated for hit acts like Alicia Keys, Blink 182, the Dave Matthews Band and Korn.
Clear Channel expects to boost conglom’s cash flow to between $600 million and $615 million in the second quarter.
Investors also were bullish on the company’s prospects: Clear Channel shares climbed 3.4% to $46.66 on heavy trading volume Tuesday, outpacing gains in the overall market.