Wells Fargo Securities high yield bond analysts Bishop Cheen and Davis Hebert may be negative on radio bonds, but they have a very different view of the public bonds of television companies.
“Local TV broadcasting appears to have the most earnings upside in 2010, relative to our other media subsectors,” the analysts wrote in their detailed report on radio, TV, outdoor and cable/satellite bonds. They see gains in core advertising revenues, strong political advertising, growing retransmission consent fees and new revenues coming from Internet sites connected to TV stations. And finally, they note, many broadcasters cut expenses in the recession and now have lower overhead costs.
“Second to none, the stabilization of core local advertising is the key for local TV stations in 2010 and beyond,” the report states. Cheen and Hebert are looking for mid-single-digit growth for local ad revenues in 2010 and low-single-digit growth for national.
TV Broadcasting is the only one of the four sectors to receive an “overweight” recommendation from Cheen and Hebert. Within the sector, they have overweight recommendations on bond issues by Barrington, Bonten, Foxco Acquisition, Local TV, Newport TV, Sinclair and Univision (only the 12% senior secured notes due 2014). Of those, it should be noted, only Sinclair has publicly traded stock. The good bond action, it seems, is in the companies whose ownership is private.
RBR-TVBR observation: Wall Street has taken note of the turnaround which is now taking hold for broadcasters. Just as stock prices were beaten down, but recovered in recent months, and how, bond prices have improved for broadcasters as well – at least for those who were not so heavily indebted that they were headed into bankruptcy reorganization.