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Boyle sees improvement ahead

Following last week's report from the Radio Advertising Bureau which showed radio revenues down 3% in July (9/3/04 RBR Daily Epaper #173), analyst Jim Boyle at Wachovia Securities is telling investors that July should be the bottom, with improvement ahead.

The consensus of Wall Street analysts had been that July revenues would be down 2%, so the actual number was worse than expected. "We believe that this should signal the bottom as August is slightly positive and September is stronger than August," Boyle told clients.

There's both good news and bad news in the analyst's latest commentary. First the good news: "We believe that the radio recovery should accelerate in Q4. The election advertising should be dramatic, squeezing inventory for TV and causing a spillover effect into radio. The heavy political spending may also use secondary media, such as radio. Finally, the very easy Q4 comp of negative 1% should enable radio to ramp up via mathematical help."

And now the bad news: "Why might radio not get that much better? We believe that the ongoing weakness in the radio sector is caused by the lack of pricing power, as the largest groups continue to offer discounted ad rates to grab whatever available ad dollars exist. The commendable long-term move by CCU to cut back bloated inventory (which stems from ad rate-cutting) should shift the demand-supply equation back to radio's advantage," Boyle said.

The analyst also had a stock recommendation for clients - - one radio stock that he called a "stand-out." That stock is Radio One, which he said "continues to exhibit above-average growth, with its Q2 top-line growth tripling and its Q3 estimated guidance likely doubling the sector's pace."