“It looks like the better days are finally here for radio,” wrote Bishop Cheen and colleagues at Wells Fargo Securities as it previewed the earnings reporting season currently in progress for Q1 2010. WFS also cautioned that the gains are coming against extraordinarily easy comps.
Positive comps for Q1 will end an 11-quarter streak of red numbers. And if positive comps can be sustained for the full year, it will mark the first year of positive comps since 2004. However, even if radio ends the year 8% over 2009, it will be about $4.5B short of its revenue high water mark of $21.7B.
Cheen expects that only some of the cost-cutting measures that have been put in place are sustainable. Others were not cost cuts so much as they were cost postponements, so expenses are expected to rise this year.
Free cash flow is expected to be directed toward debt repayment.
Cheen believes the industry is in need of further consolidation, and will be focusing on when, or even if, companies will start looking at M&A activity again.
RBR-TVBR observation: Yeah, yeah, the comps are easy. The point is that finally, radio has managed to turn in the right direction. The freefall is over. Now the work begins to sustain the gain.