Tuesday | February 07, 2012
Stock Spotlight: Lights, Camera, Action! Television Stocks
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By
Michael R. Abramowitz
19 December 2007
Televisions are as common as furniture in American households. Various medium-sized corporations exist that own multiple local television stations all across the country. So, are these companies cash cows or are they sending out an emergency distress broadcast signal to investors? Let’s flip through the lineup of TV station owners and see if there’s any stock news worth tuning into.
Hearst-Argyle Television Inc. (HTV)
SNAPSHOT: Hearst-Argyle, a subsidiary of The Hearst Corporation, owns and operates 26 television stations, manages three more, and also owns two radio stations-all in the United States.
PRICE: $23.03
PROS:
* Parent company Hearst Corp. just made a tender offer for $23.50 per share to acquire the remaining 27% that it does not already own. This could open it up for others to jump in at a higher price as Hearst-Argyle’s board fended off its parental unit calling the bid "inadequate." Yes, yet another happy television family.
* The stock has ping-ponged in a trading range for at least five years, leaving a simple pattern to follow. Buy at $20 a share, sell between $26-$28 and then wait for the summer rerun. The only catch is at some point the stock is going to break out of the range for better or worse.
* There is an earnings savior on the horizon for televisionland in 2008-election year advertising. Earnings are projected to jump 65% next year (if you can believe the pundits). In any event, the cycle of political ads-however misleading and horrendous they may be-will bring a windfall for TV stations next year.
CONS:
* Don’t adjust your dials, but Hearst Argyle has $1 billion of debt and $39 million of cash on the books. I realize that TV is a cash-intensive business, but my goodness, that’s not exactly an Emmy Award-winning performance by management to say the least.
* Management just may get cancelled when it is all said and done, especially with earnings expected to drop 35% this year. The Google advertising effect strikes again.
* Hearst-Argyle shares have suffocated over the last year like someone with an Argyle sweater that has a neck two sizes too small. The stock has basically flat lined-down 2% year-over-year.
Sinclair Broadcast Group, Inc. (SBGI)
SNAPSHOT: Sinclair Broadcast Group is a television broadcasting company that owns and provides programming, operations and sales services to 58 television stations in 36 markets.
PRICE: $12.37
PROS:
* The stock has been a ratings smash over the last year, as it has climbed the charts to the tune of 49%. Shares have slid back approximately $5 a share off their spring highs, which might give a savvy investor a good entry point following the typical summer and fall doldrums for media stocks.
* The company pays a 4.6% dividend, which is highly unusual for a media company. Should the shares rebound off their recent spiral, this could make for some nice extra gravy on any return that you can dial up.
* Similar to Hearst-Argyle, the election year lineup for advertising just might make Sinclair Must See TV for media investors. Critics, er, analysts are forecasting year-over-year growth of nearly 80% in 2008. Let’s just hope this isn’t yet another election year campaign promise gone awry.
CONS:
* Sinclair’s debt-to-equity makes Hearst-Argyle look like a miniseries in comparison. Get this-$1.3 billion of debt and $9 million in cash. Some corporate bean counter must be looking for a stunt double right about now.
* While next year’s earnings hold much promise, this year’s earnings reports are the investment equivalent of a bad sitcom-to the tune of a 33% clip off the bottom line.
* With earnings "on hiatus" this year, it’s not much a surprise that revenues are projected to come in $21 million less than last year, which, in all fairness, was a hotly contested election year.
LIN TV Corp. (TVL)
SNAPSHOT: LIN TV owns and operates 31 television stations in 18 markets. The company was formerly known as Ranger Equity Holdings.
PRICE: $13.72
PROS:
* After performing as bad as Bret Michaels in "Rock of Love" last year when LIN TV lost more than $4.78 a share, the company is incredibly on track to earn 18 cents a share.
* The sequel for next year looks just as sweet, as earnings are forecast to jump another 316% to 75 cents per share. Now, if they could just do something about the content of local newscasts so the rest of us could prosper too.
* LIN TV has had more earnings surprises this year than a celebrity roast. The first two quarters have seen surprises to the upside of 2-3 cents per share, which will make any investor’s ratings book sing during sweeps week.
CONS:
* Even though net income has made a remarkable comeback revenues are expected to decline by $29 million or approximately 7% this year.
* Earnings estimates for the year have come down 5 cents a share from where they were three months ago. In conjunction, share prices have followed suit falling 35% off their highs in June and July. Still, who can complain when the stock is up nearly 70% despite that fact?
* Shares are $6 below where they were when the company said they would pursue "strategic alternatives." That’s corporate speak for the "For Sale" sign is out.
Michael Abramowitz is a freelance writer based in Florida. To avoid a conflict of interest, he does not currently own any of the stocks mentioned above.
Price quotes are from November 12, 2007.
© 2008, Young Money Media, LLC. All rights reserved.
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geckoizback said:
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this article is useless.