Wall Street warms up to media

'Trek' helps Viacom buck Monday's downtrend

A round of mostly dismal earnings over the past several weeks has nonetheless left Wall Street feeling better about showbiz stocks than it has in several months.

What’s cheered the Street is that dreary numbers came hand in hand with CEO assertions that while things still look bad, they don’t seem to be getting worse. For investors facing an earnings abyss, the sight of the bottom for major media companies was welcome, no matter how deep a toll the slowdown in consumer and advertiser spending took on earnings for the last quarter.

On Monday, however, many media stocks were hit by the broader market downturn that sent the Dow index down nearly 156 points. Powered by the B.O. bounce from “Star Trek’s” strong opening, Viacom was the only one of the majors to buck Monday’s downtrend, nosing up 0.04% to close at $23.10.

But over the past two months, share prices in media companies that had flirted with or hit historic lows have been steadily inching up. Through last week, CBS was up 179% from its nadir of $3.09 on March 9. News Corp. was up 98% from its $5.65 low on the same day.

“People didn’t know how low the earnings would go,” said one analyst.

Investors who thought next year could be even worse feel more comfortable that it won’t be, although there’s still concern that earnings will be stuck in a long slump.

 “Now the question is how long will it be like this?” the analyst added.

The slow turnaround in Wall Street perceptions of media stocks is fueled in part by larger economic indicators, like unemployment. Standing at 8.9% in April, it was bad, economists said late last week, but worsening at a slower pace.

CBS chief exec Leslie Moonves acknowledged in a conference call last Thursday that the advertising market, the lifeblood of media companies, was dour in the first three months of the year.

“We are seeing early signs of improvement in the advertising marketplace, both locally and nationally…(although) it’s premature to call it a recovery,” he said.

Moonves backed up his claim by predicting that CBS’ full-year operating income would be in the range of $1.7 billion-$1.9 billion.

“I think CBS issuing full-year guidance was an indication of their confidence in the stability of their advertising going forward and in some of their less cyclical businesses like the syndication sales,” said one Wall Streeter.

 In Disney’s earnings call last week, Mouse CEO Bob Iger said spending trends in advertising, travel and tourism and homevid sales “seem to be continuing and not worsening.”

He said the retail business was still vulnerable. Consumer products make up a big chunk of revenue for Disney and Viacom, which was slammed by sliding sales of popular musicvideo game “Rock Band.”

 But Viacom CEO Philippe Dauman noted “signs in the last several weeks that the economy might be stabilizing… We’re feeling considerably better than we felt two to three months ago as we enter this important upfront season.”

It’s a fortuitous coincidence that the first ray of light in one of the nation’s worst ad recessions ever comes just a few weeks before broadcast networks are scheduled to introduce fall shows to advertisers at the so-called upfront presentations.

It may give media companies an unexpected smidgen of bargaining power in what’s slated to be one of the weakest upfronts in years. And it may embolden some networks to hold back more commercial time for the scatter market later on, when they hope to command higher prices.

“There’s an element of peer pressure,” said one analyst. “I think exuding an appearance of strength is important.” In other words, no one wants to be the only showbiz CEO to come out in early May saying that upfront sales are likely to be weak.

He also pointed out that the data executives are relying on to say they’re seeing stability is somewhat anecdotal, not regulated, uniform or a standard metric.

Of course, in the current roller-coaster market, no one has the last word. Media stocks were hard hit Monday as the overall market dipped.

CBS fell nearly 11% to $7.62.

Officials at GM and Chrysler were expected to start contacting dealerships Monday to inform dealers whether they would close. News that automakers are on the rails and dealerships are closing isn’t new but still may have made investors jittery. CBS is the media company most exposed to local advertising, both TV and radio, and thus gets hit the hardest with every shift of investor sentiment.

Disney fell 2.94% to $24.71.

New Corp. was off 3.42% at $10.72.

Time Warner dropped 3.29% to $24.37.