Barclays analysts raise 2010 advertising forecast


Anthony DiClemente and George Hawkey at Barclays Capital have turned more bullish on the US advertising market for 2010. They’ve raised their forecast for most media, including a strong boost in their radio expectation, and they’ve moved local TV into double digits.

“We now estimate that total 2010 U.S. advertising will grow 5.5% year-over-year in 2010 vs. our prior estimate for +3.5% year-over-year. The largest source of category upside to our prior estimates was automotive and political TV advertising, particularly in the back half of 2010. While we maintain a bullish view on ad trends themselves, we do believe that investor expectations for advertising growth are more adequately reflected in stock prices at this juncture, as media now trades at a premium to the stock market on basic valuation multiples,” the analysts said in a Friday update to clients.

DiClemente and Hawkey note that optimism has been growing in the key automotive sector throughout the first quarter. “We believe automotive advertising category for both the manufacturers and dealers continues to strengthen robustly. In 2009 the automotive advertising category as a percentage of the total fell roughly 200 basis points (bps) vs. 2008, or roughly $3.5 billion year-over-year. We anticipate that automotive could potentially regain this $3.5 billion in 2010, driving upside for those media heavily exposed to automotive advertising dollars – specifically the local TV stations (CBS, NWSA), sports entertainment cable networks (ESPN), local radio, and outdoor. We expect auto spending could bleed outward into more non-traditional cable networks given the current state of the relatively expensive TV scatter marketplace, as manufacturers and dealers look for incremental audience,” they wrote.

Barclays Capital Advertising Forecast for 2010  
Medium Orig. Forecast  2/15 Update  3/26 Update
Total TV (incl. Olympics & political) 4.60% 10.10% 12.70%
Internet (local & national) 5.70% 8.90% 8.90%
Outdoor 0.00% 6.00% 6.00%
Radio -4.00% 2.20% 7.40%
Magazines -10.00% -3.00% 2.00%
Newspapers -10.00% -5.80% -3.30%
Yellow Pages -9.00% -4.50% -8.00%
Total US Advertising (incl. Olympics & political) -0.30% 3.50% 5.50%
Total US Advertising (ex. Olympics & political) -1.40% 1.80% 3.70%
TV Forecast Breakdown Orig. Forecast  2/15 Update  3/26 Update
National network TV (incl. Olympics) 4.50% 7.80% 9.80%
National cable networks 5.50% 6.00% 6.50%
Local broadcast (incl. political) 3.00% 5.00% 10.00%
Source: Barclays Capital  

Noting that the market has already given a boost to media stocks, DiClemente and Hawkey have Scripps Networks Interactive (SNI) as their top pick. “We are raising our estimates for SNI driven by higher industry cable advertising expectations, ratings growth, and the potential for upside surprise driven by the Travel Channel,” they said. “We are raising our 2010 EBITDA by $30 million. Our 2010 EPS goes to $2.06 from $1.94 and our 2011 EPS to $2.41 from $2.31. We are also raising our target price to $50 from $48.”

RBR-TVBR observation: The ad market is improving so rapidly that analysts are having to race to try to keep up. Some, though, are trailing well behind. Keep reading RBR-TVBR for more on this subject.