Toyota Seen Contributing to Broadcast Recovery

Auto sector shows signs of coming back
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NEW YORK: Several broadcasters reported improvement in the auto advertising segment over the last couple of quarters. Now Wells Fargo’s Marci Ryvicker sees further room for improvement, especially for traditional media platforms.

“With auto being one of the largest ad categories in the United States, its year-too-year growth or decline tends to be significant,” she said in a analyst note today. “We see five catalysts in 2010 that could drive H1 growth in this meaningful category:
1) Toyota’s recent ad campaign, which has been scheduled for March 2 through April 5 but may likely be extended;
2) the piggy-backing of other automakers, particularly GM, Ford, Chrysler and Hyundai, which together comprised approximately 52 percent of ’09 auto unit sales versus Toyota at approximately 17 percent;
3) GM’s reinstatement of 661 dealerships--out of a total of 1,100 closed in mid-2009;
4) easy prior year comparisons--auto advertising was down roughly 50 percent in H1 2009; and
5) the Olympics, which has historically been an advertising ‘haven’ for auto makers.

“While all traditional media are likely to benefit, we view TV broadcasters as having the most potential upside to estimates, followed by radio, then local cable and lastly outdoor,” Ryvicker wrote. “TV broadcasters have been the greatest beneficiaries of the auto ad blitz. It is no surprise that the TV broadcasters have been the most bullish of all traditional media given the Super Bowl, Olympics and political, which have tightened inventory and rates.”

Broadcast TV stocks are up around 38 percent year-to-date, she noted, versus the S&P 500, which is up 2 percent.

“We believe that expectations are high, and rightly so. As auto comprised approximately 15 percent of broadcast ad revenue in ’09 versus historical levels of approximately 25 percent, we believe there is still room for potential upside,” she said. “We anticipate that incremental auto ad spend could result in several hundred basis points of additional top-line growth--for the TV broadcasters, a rising tide lifts all boats.”

Among broadcasters, Ryvicker said CBS has “significant exposure to Toyota.”

“With Toyota its largest advertiser, CBS is likely to see the most benefit from Toyota’s recent ad campaign,” she said. “We estimate that Toyota comprises roughly 1.5 percent of CBS’ total revenue and roughly 2.5 percent of total ad dollars. Our current 2010 estimates are for 5 percent growth in revenue, 26 percent growth in EBITDA and earnings per share of 94 cents versus consensus estimates of 4 percent, 29 percent and 94 cents, respectively. We believe there could be modest upside to estimates.”

(Image by xwelhamite/G.B.B.)