Broadcast TV Stocks Surge

MULTIPLE CITIES: TV stocks climbed past the overall market in the last few days as the sector regains favor with Wall Street. An aggregate index of 26 TV station stocks have surpassed the Dow Jones, S&P 500 and the NASDAQ this week. The indices are up around 5 percent for the year, while broadcast stocks are up more than 9 percent.

“Given the positive commentary on broadcast TV trends from both private and public contacts, coupled with increasing auto sales... and the likely windfall from telecom ad spending, we are incrementally positive on the broadcast space,” Wells Fargo analysts wrote this week in a note highlighting Sinclair (NASDAQ: SBGI).

Sinclair reported fourth-quarter broadcast earnings today of $33 million, or 40 cents per share, on station revenues of $190 million. The Hunt Valley, Md., company runs 58 TV stations in 35 markets. It exceeded Wells Fargo’s revenue target of $183 million, and it’s own guidance of between $182 million and $186 million. For the full year, Sinclair’s TV stations pulled in $655.4 million, yielding $76.1 million in profit, or 94 cents a share. The company also announced the reinstatement of its dividend policy this morning.

“SBGI declared nice recurring dividend this morning of 12 cents per quarter, or 48 cents a year, which represents about a 5 percent yield on yesterday’s closing price,” Wells Fargo’s Marci Ryvicker said. “This reinforces our thesis on the health of the television broadcast industry in general and why SBGI is likely to outperform.”

Ryvicker and her colleagues raised SBGI’s outlook yesterday from “market perform” to ”outperform,” saying it had its lowest-ever leverage and the lowest in the broadcast space. The Wells Fargo team said 2011 is already shaping up to be one of the best odd-numbered years in the sector. Odd-numbered years are typically off because of the absence of big spending on elections and Olympics. The rosy outlook is due in large part to the recovery of the automotive industry.

“In 2009, only three car brands advertised during the Super Bowl, spending $18 million--the lowest in six years,” the Wells Fargo note said. “According to recent trade publications, this past Sunday’s game included a record nine auto brands from six different parent companies.”

Car commercials generated roughly 25 percent of broadcast TV ad revenues before the recession, and 15 percent during, causing the sector to implode in 2009. Last year’s election revenues finally pulled the TV industry out of the doldrums. Sinclair reported all-time high political revenues of $41.9 million for 2010. Automotive was up 37 percent, comprising nearly 18 percent of time sales.

Among other reporting companies:
Meredith’s 12 TV stations reported record political ad revenue of $33.6 million for the final six months of 2010. Meredith raised its quarterly dividend by 11 percent to 25.5 cents. Citigroup raised it from “hold” to “buy.” Zacks raised it from “neutral” to “outperform,” establishing a target price of $38 per share. Meredith shares (NYSE: MDP) were trading for $34.12 at mid-day, up 14 percent from a year ago.

McGraw-Hill’s eight TV stations generated $28.4 million in revenues during last year’s final quarter, up nearly 22 percent from the previous year on strong political ad sales. Full-year revenues were up 18 percent to $96 million.

Belo’s 20 TV stations earned $39.9 million on revenues of $206 million for 4Q10. Political reached a near record of $35.7 million. Full-year profit was $86.9 million on revenues of $687 million, including $56 million in political spending. Automotive was up 29 percent for the year. Belo shares were trading today at $8.05, up 25 percent from one year ago.

Gannett’s 23 TV stations generated 4Q10 operating income of $116.3 million--up 47 percent from a year earlier--on revenues of $220 million. Political contributed $52.4 million. Gannett said TV revenues faced “headwinds in the first quarter of 2011” without the Olympics or the Super Bowl on NBC, but that growth in the low single digits was nonetheless expected. Gannett (NYSE: GCI) was trading today at $17, up 22 percent from a year ago.

Media General’s has 18 TV stations, digital and print properties pulled 4Q10 revenues of $189.9 million, “driven by a 29 percent increase in broadcast revenues, which reflected strong political advertising and an overall firming in broadcast transactional business,” the Richmond, Va., media company said. Media General (NYSE: MEG) doesn’t break out its results by media platform, but rather by geographic segment. The stock was trading today at $5.84, down 32 percent from a year ago.

Among the broadcast networks reporting, Disney’s TV revenues were up 11 percent to $4.6 billion for the quarter ending Jan. 1, 2011. TV operating income rose 47 percent to $1.1 billion. Disney owns the ABC network and 10 affiliated TV stations, as well as radio, cable, digital, studio and syndication businesses.

News Corp.’s Fox Broadcasting Company reported its best quarterly profit in two-and-a-half years for the three months ending Dec. 31, 2010. The TV business reported operating incomes of $151 million, led by a $121 million year-over-year increase for the TV stations and the broadcast network.

4Q10 NBC Universal profit was up 38 percent over the previous year, according to General Electric, which is divesting majority ownership to Comcast.

CBS, Journal, E.W. Scripps and The Washington Post Co. are scheduled to release earnings reports yet this month.
-- Deborah D. McAdams