After listening to upbeat broadcasters in their quarterly conference calls, Wells Fargo Securities analyst Marci Ryvicker did some further checking into the relative strength of ad pricing. What she found is more good news for broadcasters.
“Pricing continues to firm into Q2,” Ryvicker said in a note to clients. “We had a chance to talk to various local advertising contacts post Q4 earnings to determine how much of the top line strength is comp-driven versus demand. While no one would speak in terms of ‘certainty,’ most said it feels like half is comp driven while the other half is demand. The most important data point that we picked up is that price continues to firm – first in television, followed by radio and lastly outdoor (which we believe will be the last to turn positive but is not far behind – likely Q2).”
Echoing the Q4 results of radio companies – where larger market groups generally did better than their smaller market brethren – the analyst says the big markets are still leading the charge.
“Our contacts tell us that large market radio is currently pacing up double digits, with national the primary source of strength (although local is still up). We would anticipate that small market radio is about a quarter behind large market radio, and outdoor a quarter behind that. We believe there is still upside to most 2010 top line estimates,” Ryvicker said.
“Although not occurring just yet, many of the broadcasters we spoke with believe that the traditional advertisers will start to book much earlier as we move through Q2 in order to avoid the political ”squeeze” that will begin to happen closer to the Congressional elections. Visibility continues to improve although is far from where it was pre-recession,” the analyst noted.
With all of the positives coming together in 2010 – an economic recovery, political spending, auto recovery and Olympic-related advertising – some investors are already beginning to ask Ryvicker about 2011 and beyond. “As we move into the second half and 2011 becomes more uncertain, we think investors will start to focus more on late-cycle media, such as outdoor,” she noted. By the way, her top stock pick is an outdoor company, Lamar.