Wells Fargo Securities analyst Marci Ryvicker has added Belo Corporation to her coverage universe and given the TV company an “outperform” rating, which means buy.
Ryvicker likes the balance sheet at Belo, noting that it was levered 3.7 times EBITDA at the end of 2010, compared to an average abound 4.9 times for its peers. Even without political, Olympics and as much Super Bowl advertising this year, she still sees the company staying around four times. “Couple this financial flexibility with $100 million-plus of annual free cash flow, and we would expect a meaningful dividend sometime in late 2011 or early 2012,” the analyst told clients.
Belo has the “Oprah Winfrey Show” on 11 stations. “We anticipate that when Oprah leaves BLC’s 11 stations in September 2011, replacement programming will cost less than half of what BLC paid for Oprah yet generate similar ratings & revenue, which translates into an incremental $6 million of EBITDA in 2011 and $18 million in 2012.”
Ryvicker has put a valuation range of $13-15 per share on Belo. The stock had closed Thursday (3/24) at $7.56.
RBR-TVBR observation: This is no surprise to those of you readers who have Oprah on your stations – the show is not very profitable for most stations these days. It is a strong lead-in to a profitable local news block, but the syndicated show has been so successful in the ratings that many stations have maxed out what they could afford to pay to keep a competitor from grabbing it. But with the program going away there is no longer any concern that another station will use it to build the audience for their other programming.