What impressed Wells Fargo Securities analyst Marci Ryvicker about the Q4 results at Entercom Communications was not the net revenues, which were down 7% as the company dealt with some major format changes and the lack of political. But Ryvicker found good news on the operating expense line, which has led her to raise her forecast of profits for 2012.
“ETM has shown excellent expense control, with operating expense -4.0% in Q4 vs. our -1.7% estimate and guidance of flat to slightly down for the full year. We reduce our full year expense growth assumption by 113 basis points (bps) to -0.3% from +0.8%. We are likely to see a pop in Q4 – given ETM’s broadcast of the Buffalo Bills (signed in January 2012),” Ryvicker told clients.
The bottom line is that she has increased her estimate of earnings per share (EPS) from 63 cents to 73 cents for 2012. Ryvicker also introduced her first estimate of 2013 EPS, which she put at 81 cents.
“Q1 is pacing flat excluding format changes and is down low single digits as a whole. We are lowering our Q1 revenue growth estimate to +0.8% from our prior +1.2% but raising our 2012 estimate by 50bps – primarily as a result of easing comps as well as additional revenue from the Buffalo Bills. Importantly, we point out that ETM’s format changes began in Q2 — which means that prior year comparisons ease significantly throughout the year (150bps in Q2, 300bps in Q3 and 400bps in Q4),” the analyst wrote after listening to company guidance in management’s quarterly conference call.
RBR-TVBR observation: Entercom used to pay a cash dividend on its stock, but suspended it in late 2008 as the recession settled in. Thus, there is always speculation about if or when Entercom will again become a dividend payer. Ryvicker is first looking for another refi move by Entercom (at better pricing than it was able to get last year) and then a return of capital announcement when it gets to 4.5 times leverage. The analyst sees that coming in early 2013. We note, though, that a dividend is not the only way to return capital, with many companies preferring stock buybacks.