Wells Fargo Securities analyst Marci Ryvicker has been on the road, hosting two days of investor meetings with executives of Belo Corporation. She liked what she heard and reiterated her “outperform” rating on the stock.
“Near-term trends remain relatively stable despite economic volatility, and 2012 is poised to be a banner year,” Ryvicker said in a research report on Belo. Her valuation range on the stock is $9-11 – well above the Wednesday (11/16) close of $5.88.
“We would characterize the local TV business as stable, while national remains somewhat soft. This is likely due to the scatter market, which has experienced weakness from the economy and lower volume. Recall that there was a significant amount of inventory sold last year in the scatter market at prices 20-40% above upfront levels. This created a nice spillover effect at the national spot level (where BLC and other affiliates ‘play’). With a softer scatter market in Q4, however, this trend is not recurring. Ad categories that are soft include retail and movies/entertainment; while auto continues to ‘pace up nicely’,” the analyst said.
Belo management commented that auto pacings remain strong, despite some cancellations due to flooding in Thailand that has disrupted the supply chain. “We believe that Honda, which is most impacted by the flooding, is a much smaller contributor in car sales and ad spend vs. Toyota. So far, cancelled inventory has been replaced by other auto dealers or ad categories,” Ryvicker noted.
Belo reported Q3 earnings early this month. Like most broadcasters, revenues were down largely due to the lack of political spending this year.
Look for 2012 to be a “banner year” for Belo, Ryvicker told clients. “Recall that 23% of BLC’s revenue comes from its four NBC affiliates, which will have the Super Bowl and Olympics (we estimate $2M and $12M, respectively). We also expect roughly $57M in political,” she said.
Ryvicker notes that digital business accounts for roughly 7% of Belo’s revenues now and could reach 10% over the next five years, in her opinion. “Interestingly, BLC’s digital business is more cannibalistic to other traditional media (think newspapers and/or radio) than it is to broadcast TV as many purely digital advertisers cannot afford spot TV prices to begin with,” the analyst wrote.
Here’s a prediction from the Wells Fargo analyst. Belo resumed paying a cash dividend to shareholders this year after suspending it during the recession. “Based on management’s history, we would anticipate a dividend increase on the one-year anniversary, which would be April 2012,” Ryvicker said.
RBR-TVBR observation: As we noted not long ago, Belo is one of the broadcasters paying a pretty healthy dividend, along with Sinclair and Meredith. The current yield is 3.3%. Meredith recently gave its dividend a boost while Sinclair and Belo had resumed dividend payments this year after a break during the recession.