Analyst upbeat on Belo prospects


BeloWells Fargo Securities analyst Marci Ryvicker has been digging into Belo Corporation, meeting for two days with senior management of the company. Following those meetings, she said “we are more comfortable with the sustainability of auto trends, overcoming tough comps in 2013, and BLC’s retrans/reverse compensation positioning.”

In a note to clients, Ryvicker said she was somewhat surprised by Wall Street’s adverse reaction to Belo announcing a dividend hike. “Investors were concerned this was ‘it’ and that BLC may be ‘hoarding’ cash either for acquisitions or for redemption of its $175.5MM, 6 3/4% notes due May 2013,” Ryvicker suggested. “BLC was very clear in our meetings that a) there is no hoarding of cash; 6 3/4% notes can be redeemed via its $200MM untapped revolver plus some cash, b) wanted to offer a nice shareholder return with room for both flexibility and sustainable increases, and c) cash will be used toward opportunistic investments, either in digital (more likely) or stations (less likely).” The analyst added that Belo management specifically stated, “We see further dividend increases in our future.”

At Thursday’s (3/22) closing price of $7.14 Belo’s common stock was payng a dividend yield of 4.4%.

Auto remains strong, Ryvicker said of advertising trends after here meetings with Belo’s top brass, while other categories are mixed. “For BLC, auto was 21% of spot revenue in 2011 (peak was ~23%) and was +17% in Q4 with strength continuing into Q1. In prior conversations with other operators, we had heard auto may have weakened towards the end of Q1 and asked BLC management what they are seeing. While there was no confirmation of auto category weakness, management did state there could be some timing issues in markets where auto sales were so robust that lack of inventory replenishment may have delayed some ad spend. In terms of other ad categories: retail, restaurants, healthcare and financial services have held up well; while entertainment (movies in particular), telecom and groceries have been somewhat weak,” the analyst said.

“Not surprisingly, national has lagged local – maybe due to consolidation among large advertisers and/or a flow-through effect from weak scatter. That said, local has held up well and comprises 65% of BLC’s spot revenue,” Ryvicker added.