Credit Suisse Updates Its Global Media Outlook: What's New?

On March 17th, Credit Suisse updated its outlook for Global Media stocks. While it reiterated its overall Neutral position on Media, there are a number of areas of strength that it expects to be found in the sector this year.

Highlights of the report include:

Earnings performance by segment- 2007A vs 2008F

Agencies performed in line with 2007 expectations with +7.2% EPS growth. There are no significant changes to our 2008F expectations of +13.5%.

Cable/Satellite performed ahead of expectations in 2007, with +13.7% EPS growth. Outperformance came from a number of U.S. names including DirecTV (DTV), Comcast (CMCSA) and Time Warner Cable (TWX). Net Sat was also boosted by tax benefits. EPS expectations for 2008F have reduced significantly from +91.5% to +25.2% due to a major downgrade at Premiere, where EPS expectations have been cut -49%, and at Virgin Media where EPS has reduced significantly.

Content: 2007 results largely delivered in line with our expectations at +25.7%, and there are no major changes to our 2008F estimates for +34% EPS growth.

Exhibition earnings performed below our expectations for 2007 with +22.4% growth, due to lower than expected EPS from Cinemark (CNK) and National CineMedia somewhat offset by higher earnings from Regal (RGC). Looking forward to 2008F, we look for +20.8% versus +25.2% previously.

Internet earnings performed somewhat ahead of our expectations for 2007 at +37.8%, supported by strong growth from Netflix (NFLX) and Asian Internet player Sohu.com (SOHU). Our expectations for EPS growth in 2008F have moderated slightly from +56.4% to +53.8%, largely due to reduced expectations for Yahoo (YHOO).

Newspaper earnings were slightly better than expectations for 2007 although still a -3.5% decline, with a mixed performance from the U.S. newspapers offset by stronger performance by Malaysian publisher New Straits Times. Looking to 2008, EPS expectations have reduced from +18% to +14.2% with lower earnings across our universe with the exception of the two Malaysian publishers, Straits Times and Star Publications, and Naspers in South Africa.

Outdoor earnings performed substantially ahead of expectations for 2007, with EPS growth of +42.9%, and most companies outperforming. However, our expectations for 2008F (on a like-for-like universe) have reduced considerably to +4.2% EPS growth from +26% previously. Significant consensus EPS reductions for Lamar (LAMR) (-35%), and Credit Suisse estimates for Affichage in Switzerland (-20%) are the key drivers of this change.

Professional/educational and financial publishers performed marginally below our expectations for 2007 with +8.8% growth. There have been modest reductions to our expectations for growth in 2008F which now stands at +12.8%.

Radio stocks underperformed our depressed expectations for 2007, delivering the worst sectoral performance, with a decline of -21.3% versus our -17.3% expectations. The law of small numbers is delivering current expectations of EPS growth of +51.9% for 2008F. However, we note that this EPS is not operationally driven, with EBITDA growth forecast at only +0.8%.

Television stocks slightly outperformed our expectations for 2007, delivering EPS growth of +16.8% compared with our +15.8% expectations. Outperformance by Thai broadcasters BEC World and MCOT were the key drivers. Forecasts for 2008F now call for 12.5% EPS growth compared with +25% previously. Key factors are meaningful EPS downgrades for most of the Japanese broadcasters, offset by higher expectations for the Thai broadcasters off the stronger 2007 base.

Figure 1: Credit Suisse Media EPS growth forecasts - 2007 and 2008F

click to enlarge

Source: Company data, Credit Suisse estimates, Consensus estimates

Disclosure: None

Comments

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2008 May 20 05:02 AM