Analyst: Emmis looks marginally better in NYC and LA


As one of the few Wall Street analysts still covering any pure play radio companies, Wells Fargo Securities analyst Marci Ryvicker was busy Friday poring over the quarterly numbers from Emmis – whose fiscal calendar has it putting out results a few weeks ahead of the other broadcasters. She found some signs of improvement.

She noted that the biggest markets for Emmis (and the rest of radio) looked marginally better. “It sounds like the NYC and LA markets are slightly better quarter-to-quarter.  In Q1, the NYC market was -24% and for the 6 month period ended August 31, the market was -21%.  In Q1, the L.A. market was -28% and for the 6 month period ended August 31, the market was -26%,” Ryvicker said in a note to clients.

“While average unit rate seems to have improved slightly, the numbers are still awful.  Average unit rate was -34% in fiscal Q1 and -30% for the 6 months ended August 31. Sell-out actually declined, at -1% in fiscal Q1 vs. -2% for the 6 months ending August 31,” she wrote.

After talking on the phone with Emmis management, Ryvicker added some more interesting details:

– EMMS’ domestic segment is improving, while international has gotten worse. Looking at radio by segment, domestic revenue was -22% in FQ2 vs. -27% in FQ1 and international revenue was -45% in FQ2 vs. -31% in FQ1.  Domestic BCF was -39% in FQ2 vs. -61% in FQ1.

– September (which will be reported in the company’s FQ3 results) was better than August and October seems to be better than September – so there is sequential improvement in the large markets, which confirms positive comments made by CBS and other large market radio groups.

– Commentary from Jeff Smulyan (EMMS CEO) indicates that there could be positive growth within a few months – echoing a comment made by David Field, CEO of Entercom, just a few weeks ago.

– Management is hopeful that auto is coming back – particularly from GM and Toyota (they have a fair amount of exposure to Toyota in L.A.).

– Comments on the radio royalty bill suggest that it is not going to pass (very good news for radio given that this sector does not need an additional expense right now – in our view).

So, the analyst gave her bottom line assessment: “Comments from EMMS management confirm what we have been hearing from other large and small market groups – trends continue to improve month to month. We currently forecast a 2% decline in radio for 2010, although this may prove to be too conservative,” Ryvicker wrote.

RBR-TVBR observation: Our report Thursday on Broadcasting stocks soared in Q3, showed broadcast stock prices taking off in Q3, with Wall Street anticipating a recovery in US advertising. Indeed, Ryvicker is predicting that as quarterly reports come in, media companies will meet or beat bottom line expectations – albeit, due mostly to cost cuts rather than revenue improvement – and stock prices will continue to move higher.