More doubts about radio groups


Several Wall Street analysts came out with updates yesterday cutting their estimates for Emmis, following last week’s quarterly conference call. One also reduced estimates for Radio One.

The reaction from Wall Street was hardly surprising. Emmis CEO Jeff Smulyan said in his call that he saw signs of improvement, but gave little tangible evidence of improvement in the company’s guidance for the current quarter. At Bear Stearns, analyst Victor Miller noted that the guidance for the current fiscal Q3 was for domestic radio revenues to be down in the mid single digits. That was better than the 8.7% drop in fiscal Q2, but worse than the 3-5% drop that Miller had been expecting. He has reduced his full year revenue estimate for the entire company to 351.1 million, down from the previous projection of 354.8 million. And he seed EBITDA of 66.6 million, rather than 69.1 million. In miller’s view, Emmis’ stock is "fairly valued" and he maintains his "Peer Perform" rating.

"Emmis’ revenue outlook remains challenging, given market-specific and industry headwinds. That said, a case for easy comps and a stabilization on the horizon can almost be made, and meanwhile we believe there is some probability that shareholders could receive either a tender offer or share in an equity distribution if any one or two of the stations in New York, Los Angeles, or Chicago are sold," wrote analyst Mark Wienkes of Goldman Sachs, who maintains his "Buy" rating, despite reducing his financial projections for Emmis. The upside, he says, is the asset value.

Bank of America analyst Jonathan Jacoby questions the likelihood of investors realizing the spread between the stock price and the break-up value, given Smulyan’s voting control. Based upon that and "continued weak radio fundamentals," Jacoby has lowered his target for the stock to six bucks from 10 and maintains his "Neutral" rating.

Wienkes at Goldman Sachs also issued a report on Radio One yesterday, reducing his 2008 revenue estimate by 5% and his EBITDA estimate by 9%. "We are lowering our estimates and price target for Radio One owing to the continued challenging radio industry revenue trends. Radio One’s ratings are improving but underperformance in key markets such as LA has the company pacing below industry trends," Wienkes wrote. His new price target is four bucks, down from six.