Calling Q3 a "disappointing quarter," Citadel Broadcasting CEO Farid Suleman told analysts he is withdrawing the company’s previous guidance for 2008 after reporting a 3.6% pro forma drop in Q3 revenues. Wall Street reacted with panic, sending Citadel’s stock price plunging 38% on Friday, making it the day’s worst performer of all stocks traded on the New York Stock Exchange. The newly acquired ABC Radio stations were the biggest problem, down 7%, with Atlanta and Detroit down double digits, and the core Citadel stations were down as well. But revenues rose 1.5 million for the ABC Radio Networks and Suleman said the radio networks have started to turn around.
"There is still substantial upside in all of our segments of the business. Over the next three months you will see some of the changes that we’re making – then we’ll start getting the results," Suleman assured the investment community. Citadel had previously told analysts to pencil in 400 million in EBITDA for 2008, which was adding 30-40 million to what the company had expected to report this year. "It is just very hard for us to predict where the market is going to be in light of the current economic conditions," he noted as that guidance was rendered null and void.
Because of the tough financing market in the current economy, Suleman said he is in no rush to sell the stations that Citadel had been planning to divest after bulking up with ABC. "Clearly the multiples have declined," Suleman said. Until two months ago, he said, private market buyers were still willing to pay strong multiples, even if the public companies could not. But with the changes in the financing market, even the private guys are backing down on multiples. He adds, though, that there don’t seem to be any deals getting done. "As far as we’re concerned, we will continue to look for opportunities to sell some of the stations that we had previously said we want to sell. We are in no rush to do it, so we don’t have to take low prices," Suleman said.
RBR/TVBR observation: As usual, the market overreacts to bad news. In our view, though, Citadel’s board failed to put a support under the stock price by not setting a dividend policy since the ABC Radio acquisition, which brought in lots of new shareholders from Disney. It has been too many months without paying a dividend, or at least stating what dividend will be paid in 2008. (follow up in Wall Street section)
