5 Media Titans to Watch

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 |  Includes: CBS, LMCA, NWSA, SNI, TWX
by: Efsinvestment

There is no doubt that the Internet has brought brand new instruments to deliver news to corresponding audiences. However, the early claims that implied that social media will gradually replace the mass media in the end were quite hurried statements. Recent studies have shown that mass media still maintains its monopolistic dominance on news delivery.

Yahoo Research recently published a report on diversity and distribution of issues tweeted on Twitter. The results suggest that about 50% of trend tweets were generated by 20,000 opinion leaders, most of whom are well-known media reporters who tweet about their news stories. Thus, the role that social media has undertaken is to increase the news delivery speed and amplify the initial effect.

Even though social media has created new dynamics that need more attention from mass media players, it has not changed the usual two-sided news circulation structure. It will be a mistake to draw a gloomy future about mainstream mass media companies. These profit makers will continue their business as usual, even enhance their delivery speed using social media channels. Here is a list of five U.S. media conglomerates which might even benefit from the increased news distribution channels (data from finviz; current as of June 1's close).

News Corp. (NWSA) is the largest media conglomerate in the world in terms of revenues. Its CEO is Rupert Murdoch. News Corp. operates on almost all media segments with Twentieth Century Fox in filmed entertainment, Fox Television Stations in television, Fox News in cable network programming, Sky Italia, BSkyB and Sky Deutschland AG in direct broadcast satellite television, News America Marketing Group in integrated marketing services, The New York Post, The Times and The Sunday Times in newspaper and information services, HarperCollins Publishers in book publishing, and MySpace and IGN Entertainment in other Internet-related operations. It has a $46.36 billion market value. P/E ratio is 15.90, as the forward P/E ratio is 13.17. The corporation’s current dividend yield is 0.85%. Its profit margins are more or less at industry standards. Gross margin is 36.49% and operating margin is 11.95%. Although EPS growth in the past five years was 6.85%, EPS growth in the next five years is expected at 13.39%. The stock is up by 50% since September. RBC has a target of $20, implying 14% upside potential in intermediate term.

Time Warner Inc. (TWX) is one of the largest media conglomerates in the world. It has three main segments. It has subsidiaries in many media segments similar to NWS, including New Line Cinema, Time Inc., HBO, Turner Broadcasting System, CNN, The CW Television Network, TheWB.com, Warner Bros., Cartoon Network, Boomerang, DC Comics, Hanna-Barbera, Cartoon Network Studios and Castle Rock Entertainment. TWX has a market cap of $37.85 billion. P/E ratio is 15.92, and forward P/E ratio is 11.19. It has a gross margin of 42.14% and an operating margin of 19.41%. TWX offers a significant dividend yield of 2.7%. Analysts estimate an EPS growth of 14.4% for the next five years. Based on the parameters listed, Time Warner has a T-Metrix score of 6 out of 10. S&P 500 (SPY) has a T-Metrix score of 4.4 The shares have been in a sustained increasing trend since December 2010. However, currently the stock is testing its resistance levels, and the trend might break in short-term.

Liberty Starz Group (LSTZA) is a holding company. Starz Group is one its most developed media segments specializing in broadcasting. Its main business is video programming. The company has a market value of $57.10 billion. Despite no dividend policy, the stock's maintained a steady upward trend since 2009. It has a P/E ratio of 19.82, and forward P/E ratio of 13.63. Operating margin and profit margin stands at 24.6% and 14.16%, respectively. Similar to TWX, the shares are testing their short-term resistance points. We might observe a short-term retreat, but the long-term trend is upward.

CBS Corporation (CBS) is another mass media company which has many business operations in many different media segments. According to Reuters, of the company's revenue in 2010, 53% was from entertainment, 10% from cable networks, 6% from publishing, 20% from local broadcasting and 13% from outdoor segments. It has a market cap of $18 billion. The current dividend yield is 1.49%. P/E ratio is 19.79, yet forward P/E ratio is expected be lower at 12.94. Its half-year performance saw a 70.92% capital gain. Similar to other companies, CBS had an amazing EPS growth rate of 214.4% this year. CBS also has industry standard profit figures with a 38.05% gross margin and 14.36% operating margin. Analysts are extremely bullish on CBS, and they have been continuously upgrading their price targets. If their estimates of 18% EPS growth for the next five years hold, with a T-Metrix score of 6, CBS might also beat the market.

Scripps Networks Interactive, Inc. (SNI) has operations in two primary segments: Lifestyle media includes six national television networks, and interactive services include Shopzilla, BizRate, Beso and Tada. SNI has an $8.14 billion market value. It generated $429 million in income with a 38% gross margin. Dividend yield is 0.8%. Current P/E ratio is 19.06, while forward P/E ratio is expected at 15.57. EPS growth in 2011 is 44.44%, while the expected EPS growth for next year and the next five years is 13%. With a T-Metrix score of 4, SNI is slightly overpriced for a higher-than-expected growth rate, compared to its larger peers in the industry.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.