Analysts differ on Cox Radio results


Wachovia analyst Marci Ryvicker says Q1 free cash flow at Cox Radio beat expectations and she’s sticking with a “market weight” rating as the stock price is collared by the $4.80 buyout bid by Cox Enterprises. But Goldman Sachs analyst Mark Wienkes is sticking with his “sell” call – and a view that Q2 won’t improve much from Q1.

The top-line number from Cox Radio was no surprise, since the company had pre-announced that revenues would be down 23% to $75.5 million. But analysts poured over the details after the company released its full quarterly report.

Ryvicker noted that local was down 21%, a bit better than her -25% expectation. But national was down 32%, worse than her projected 29% decline. “Other” revenue, including Internet and other NTR, fell 13%, while she had expected a 7% decline.

But Q1 free cash flow (FCF) was 12 cents per share, beating her nine cent estimate due to lower cash taxes and capital expenditures. So, Ryvicker has raised her FCF estimate for Q2 to 20 cents from 15 and for the full year to 79 cents from 60 cents.

With the $4.80 per share buyout pending, the Wachovia analyst says Cox Radio’s stock price is “collared” in a range of $4-5. “We remain cautious on CXR due to the deteriorating ad market and economy, but believe its investment grade balance sheet and takeout offer by Cox Enterprises warrant its premium valuation versus its peers,” she told clients.

“We maintain our Sell rating on shares of Cox Radio. While Cox remains among the best operators in a cyclically and secularly challenged industry, we continue to expect severe negative operating leverage to continue for Cox Radio in 2009, with no signs of a turnaround in radio advertising in the near-term,” wrote Wienkes after reviewing the Cox Radio numbers.

“Despite ongoing efforts to contain costs, we expect 2Q revenue to be down 22%, and EBITDA down 53%,” the Goldman Sachs analyst said. Wienkes also lowered his earnings per share estimates for 2009 through 2011.

Absent the pending buyout, his discounted cash flow analysis puts the value of Cox Radio at $2.75 per share (down from his previous $3.00), so Wienkes is telling clients to “sell” at current levels.

RBR/TVBR observation:
This may all be academic, anyway. The tender offer to buy all Cox Radio shares remaining in the hands of the public is scheduled to expire today (5/13), unless it’s extended. Cox Radio may soon be a wholly owned subsidiary of Cox Enterprises.