With no shareholder vote yet scheduled on its long-pending $1.3 billion going private buyout, analysts have been looking at the Q1 numbers reported by Cumulus Media (5/6/08 RBR #89) and are lowering their revenue estimates for the rest of 2008. Both Marci Ryvicker at Wachovia and Mark Wienkes at Goldman Sachs say Cumulus is outperforming its peers, but their price targets are still in single digits because of doubts about that buyout going to closing at $11.75 per share.
“Management did not provide Q2 revenue guidance in today’s press release but did state that Q2 revenue is pacing slightly down, which is below our +0.5% expectation but better than its peers (which we hear are pacing down low to mid single digits). We continue to believe that this above-average performance is due to: i) its low exposure to national rev (which is only 11% of revenue vs. the 20% industry avg); ii) its mid/small market exposure (mid- and small markets are doing much better than large markets) and iii) its Sun Belt vs. Rust Belt location. Station operating expenses are expected to be slightly lower than the previous year, while we had been expecting a slight increase,” Ryvicker said in a note to clients. She has reduced her revenue estimate for 2008 to $328.8 million from $332 million. But because of a lower tax rate, she sees earnings per share at $0.34, up from her previous estimate of $0.29.
With Q1 pro forma revenues up 1.4% and Q2 pacing “slightly down,” Wienkes notes that Cumulus compares favorably to most other radio operators, who are pacing down in the low to mid single digits. “We note that Cumulus has a greater mix of local ad revenue and a relatively easier comp with revenue roughly flat in Q2 2007,” he wrote. Wienkes has lowered his 2008 revenue estimate to $329.6 million from his previous $330.8 million and sees full year EPS at $0.10, down from his previous estimate of $0.15.
“Absent the current $11.75 per share management led go-private bid, we believe there is further downside to the shares,” Wienkes said. He reduced his price target for the shares by a buck to $7. Ryvicker’s price target range is $5-7, noting the risk of the buyout not going through.
RBR/TVBR observation: It seems that no one outside Cumulus believes that the buyout is going to go to closing, at least not at $11.75 per share. Certainly Wall Street doesn’t. The shares have been trading at about half the pending buyout price. But there’s been nothing new from the company in ages – either to change the buyout terms or to call a shareholder vote on the deal as it stands. Will things start to happen once the final outcome of Clear Channel’s buyout, now the subject of litigation in multiple courts, is determined?