Goldman Sachs analyst Mark Wienkes is out with new financial estimates for the radio companies he covers – and properly calls the cuts “severe.” In his view, the radio industry is “following newspapers lower.”
So, Wienkes has sharply lowered his earnings estimates and target prices for Cox Radio, Entercom and Entravision.
“Owing to the weakening economic environment and expected decrease in spending from top advertisers, we expect ad revenue for radio and TV stations to be down (8%) and (7%, ex-political) year-over-year in 2009. Even with additional political spending in 3Q08 and 4Q08, we forecast declining revenue across the group and look for negative operating leverage to be the norm in 2009,” the analyst told clients. So, he has lowered his 12-month discounted cash flow-based price targets: Cox Radio from $10 to $8; Entercom to $3 from $11; and Entravision to $2 from $6.
For Cox Radio, he now forecasts 2008 earnings per share will come in at 73 cents, down from his previous estimate of 75 cents; and that 2009 EPS will be only 55 cents, not 70. For Entercom, 2008 EPS is seen at $1.10, rather than $1.25; and his 2009 estimate is slashed to 65 cents from $1.20. For Entravision the 2008 EPS estimate is five cents, rather than 14 cents; and he projects negative EPS of nine cents for 2009, rather than 17 cents to the positive side.
“We maintain our Cautious view of the Radio Broadcasting sector and continue to expect subpar equity price performance across the group as estimate risk remains to the downside for radio stocks,” Wienkes noted.
RBR/TVBR observation: No doubt 2009 is going to be a tough year. Just how tough remains to be seen. Here’s hoping that Wienkes has overstated the case.