Broadcast Stocks To Consider In 2012

by: Dividend Kings

The entertainment industry was the only one booming during the great depression of the 1940s, a great marker for today’s recession. Although the cable entertainment industry is facing stiff competition from the internet, the good old-fashioned television network is not likely to go extinct any time soon. The following broadcasting stocks are the ones to think about if you’re re-evaluating your portfolio.

CBS Corporation (NYSE:CBS) originally started as a radio broadcaster in 1927 and today features 20 of the top 30 shows in America, and is also home to NFL’s American Football Conference [AFC]. CBS Corporation trades with a market capitalization of just under $18 billion, just signed a new broadcast agreement with the National Football League [NFL] that will run through the 2022 season, with expected revenues. CBS Corporation is trading near the $25 mark with a price earnings multiple of 15 times as compared to News Corp (NASDAQ:NWS) at 18 times.

I would recommend buying CBS Corporation as the stock has already climbed back to its mid-2011 glory. With the upcoming United States presidential elections, presumed to be a $3 billion dollar affair, CBS is expected to benefit from the party promotions and political advertising in 2012. The cable network segment recorded a 13% increase in revenues in the third quarter of 2011 as compared to the same quarter previous year.

Gannett Co., Inc. (NYSE:GCI) is the owner of the largest selling daily newspaper in the United States, USA Today. Gannett’s broadcasting division owns 23 TV stations, reaching 21 million households covering about 18% of the US population. The publishing segment has been facing fire in this digital age of internet and e-papers; the revenues from print media and broadcasting segments saw a decline of about 5%, with the exception of their digital segment, which reported a quarterly growth of 10% year over year for the third quarter 2011.

Gannett is trading above the $13 mark, marginally above its book value of $11, with a price earnings multiple of just below 7 times. Although Gannett generates about 650 million in operating cash flows(under $2 per share) and has reduced its debt to $2 billion in September 2011 from $4 billion in 2008, the cash per share is still very low at less than $1. In my opinion the stock should be considered as a ‘sell’, based on the unfavorable business segment mix due to decline in the newspaper business and loss of advertising revenues.

Viacom (VIAB, VIA.B) is the name behind popular channels such as MTV, Nickelodeon and VH1. Nickelodeon and MTV together account for 90% of the earnings for Viacom; Nickelodeon was rated as the number 1 cable channel in the United States in 2011. Viacom recorded a year on year quarterly revenue increase of 67% for the quarter ended September 2011; the main source of revenues were television channels such as MTV, Nickelodeon, and Comedy Central which contribute around 60% to the revenues. Advertising revenues also increased over 7% in both domestic and international markets.

Viacom has also seen an increase in content deals and affiliate fee of about 19% for quarter ended June 2011, as compared to the same period in 2010. Viacom is also the owner of Paramount Pictures, one of the largest and top grossing movie studios, which falls under Viacom’s Filmed Entertainment segment, contributing about 40% to revenues. Viacom is currently trading near the $45 mark with a price earnings of 12 times as compared industry average of 15 times.

Walt Disney Company (NYSE:DIS) is one of the most loved brands and the founder of animation leaders Pixar Studios, now owned by Apple Inc. (NASDAQ:AAPL). The company’s broadcasting business is covered under the media networks business segment, which includes Disney television, ABC television and also the ESPN franchises, which collectively recorded the highest ever viewership in 2010. The broadcasting segment recorded a growth of 4% year over year for the latest quarter.

Walt Disney is trading near the $40 mark with a price earnings multiple of just under 15 times, competing with the likes of Time Warner (NYSE:TWX) and Discovery Communications (NASDAQ:DISCA), which were trading at price earnings of 14 times and 17 times respectively. Walt Disney announced a 50% hike in its dividend in the first week of December 2011, as the balance sheet indicates strong cash per share of just under $2. With the 2012 elections in the United States, campaign advertising will be at its peak, which Disney should be able to take advantage of in the coming year.

Comcast Corporation (CMCSA, CMCSK) is the largest cable provider and fourth largest telephone service provider in the United States. with about 22.5 million strong subscribers in the United States. Listed in the top 50 most popular stocks among hedge funds, Comcast Corporation is trading near $24 mark with high price earnings multiples of 17 times as compared to its peer, Dish Network Corp. (NASDAQ:DISH) at 8 times. As such the stock warrants further research.

In January 2011, Comcast completed the transaction with GE for forming a new company, NBC Universal which contributed remarkably towards its cable network segment in the results for the latest quarter. This was the result of the merger of NBC’s network and its local affiliated television stations with the Comcast network. Due to its controlling interest of 51% in NBC Universal, Comcast recorded a huge addition of about $3 billion in its cable network revenues. Overall, Comcast reported a quarterly revenue growth of 51% year over year with a profit margin of 7%.

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