Radio stocks fall on Westwood warning
Radio stocks plunged Wednesday after Westwood One's (N:WON) warning that its Q1 results would come in slightly below last year (3/19 RBR Daily Epaper #55). Investors sold off radio stocks on the belief that other companies would follow Westwood's lead and reduce Q1 guidance.
"I think Westwood is just the beginning of seeing the estimates come down," analyst Jason Helfstein at CIBC world markets told RBR. He also noted that radio stocks had enjoyed a pre-war rally, and are now seeing traders take some profits.
"I think March was running flat to -5% as of last week, so I think when you factor in several days of lost advertising once the war begins, and then a 10-15% reduction for the rest of March after that, the industry probably finishes down 5-10% for the month of March," Helfstein said. Rather than the 4% revenue increase he had previously forecast for radio in Q1, the CIBC analyst is now looking for something around 1% growth.
Goldman Sachs analyst Richard Rosenstein lowered his Q1 estimates for radio companies across the board yesterday. "Although our Q1 estimates already reflected the hesitancy advertisers have exhibited in march, they did not account for the direct impact of a war in Q1. Now that a war seems inevitable (possibly beginning this week), we believe advertisers have been notifying broadcasters of their desire to halt advertising during the first 48-72 hours of a conflict (potentially a 2-3% hit to Q1 revenues)," he said in a note to investors. "Furthermore, we believe it prudent to factor in continued advertiser hesitancy in April, similar to that in March, until clarity emerges on the duration of this conflict."
Rosenstein lowered his Q1 revenue growth estimates for all five of the radio companies he covers: Clear Channel (N:CCU) to +1% from +2%, Cumulus (O:CMLS) to flat from +3%, Emmis (O:EMMS) to flat from +4%, Entercom (N:ETM) to +5% from +8% and Westwood One (N:WON) to -3% from +4%.
At Wachovia Securities, analyst Jim Boyle told RBR that what's new is that the war impact on March revenues is now seen as extending into April as well. "For the sector, we just put out on Monday that we expect 4% [for Q1] because we have February at +6% and March at +1% - - of course, that's subject to if an invasion happens very rapidly - - and we have Q2 +6%, with April a mere +3%," he explained. "We are building in essentially two war-tained months." Following up on that Monday outlook, Boyle reduced his projections for various individual radio companies yesterday.
At S.G. Cowen, analyst James Marsh said he was surprised that Westwood One was actually predicting that its Q1 would be down from last year, rather than just reduced growth, but he doesn't expect to see radio groups dropping into negative territory. "The network business is more tied to national business and national has been more volatile," he said. "It's important to point out that Westwood One had the Olympics last year, so their comps were very difficult. So even when everyone else was talking mid to high single digits, they were talking low to mid single digits." So, Marsh is still expecting public radio companies to report Q1 revenues up 4-5%.
New readers can receive our RBR Morning Epaper