CBS, IPG, TWX, VIAB, WBMD, MDCA, IACI, CMSA and More Stock Reports. Media Wall St. Report - 5/4/12

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IPG

The Interpublic Group of Companies (IPG) reported EPS this week that was in line with consensus estimates. BMO Capital's Dan Salmon got excited over IPG's 2.8% organic revenue growth it reported in a tough quarter. He thinks there is "upside tension to guidance" as the firm may outstrip its stated 3% organic growth estimate. To get there, Salmon says that Europe must show improvement to "risk offsetting acceleration in Asia-Pac (+16.9% vs +8.7% in 2011).". He raised his estimates a bit and is maintaining his Outperform and $13 PT.

While the company's growth rate was higher than expected, Goldman Sachs' Drew Borst mentioned that IPG still trails its peers in this respect. He's Neutral with a 12-month $12 PT on IPG.

MDC Partners

While auto may be driving incremental growth for MDC Partners (MDCA), investors are still clamoring for the creative agency to prove that margins will stay intact. (MDC acquired Steve Farella's Targetcast Media Group several weeks ago.) The firm reported 5.4% revenue growth and adjusted EBITDA of $7.5 million -- both above consensus. But BMO Capital Markets Dan Salmon explained in a note to investors that he'd like more proof of the margin story. "Investors are demanding proof and 1Q's in-line EBITDA results did not change that," he wrote of MDCA, which he has an OUTPERFORM on and a PT of $19.

Time Warner

Analysts were pretty impressed with Time Warner's (TWX) 1Q12 performance. Revenues of nearly $7B were up 4% over the same period a year ago and 4% above the numbers expected by Needham Research's Laura Martin. While updated EPS guidance ("growth in low double digits") from the media firm wasn't enough to get her to change her numbers, the revenue numbers were — as she now expects $29.543B in FY12.

Janney's Tony Wible views TWX similarly: while opportunities like growing demand and pricing of content work in TWX's favor, weaker ratings and potential IPTV cannibalization risk to offset them. Nomura's Michael Nathanson thinks that the stock could move, but is dependent upon "how TBS laps The Big Bang Theory in the fall, TNT/TBS ratings improvements and strong studio results.

While Needham and Janney are sticking to their HOLD ratings on the stock, Credit Suisse's Spencer Wang has more to cheer about. He expects TWX to participate in a TV ratings turnaround this year. Wang also sees the possibility for more upside if the ad market remains firm and maintained his OUTPERFORM and $3.20 (+11%) EPS estimate for this year.

A big part of the TWX thesis has been the commitment to returning capital to shareholders. Barclays' analyst Anthony DiClemente expects the company to continue the pace of the $725M in share buybacks this quarter for the rest of the year. He might have liked the ad growth at Turner and the strong performance in the Filmed and TV Entertainment segment, but thinks 2Q has tough comps. He lowered his EPS estimate for next quarter to $0.59 (from $0.68) but raised his number for FY12 to $3.20 (from $3.17). The analyst's price target on the stock is $39.

Time Warner Cable

Time Warner Cable (TWC) also reported results this week that surpassed investor expectations. PSU net adds of 261k were ahead of Credit Suisse's Stephan Anninger's above-consensus estimate of 192k. Financials weren't brilliant as $5.134B came in a bit soft, driven by lower ARPUs. Management tempered 2Q expectations, reporting that they expect similar sub growth as Q1. Anninger believes management's stated 10% operating income growth is conservative and raised FY12 EPS to $5.78 (it was $5.47 previously). He's sticking with his Outperform and believes the stock could trade in the low to mid $90s next year.

Viacom

While Viacom (VIAB) reported an estimate-beating $0.98 in adjusted EPS, it wasn't enough to get Janney's Wible off his Neutral rating. $3.31B in revenues missed the analyst's forecasts, but did get him to hike his fair value up to $55 from $52. Spencer Wang at Credit Suisse liked the upside in margins and affiliate revenue. The analyst raised his FY numbers but is still concerned about declines in pay TV penetration and weakness in cable ratings.

Comcast

Comcast (CMSA) reported strong net cable PSUs (566k) and solid financials this quarter. Cable revs of $9.599B and EBITDA of $3.955B beat Stefan Anninger's estimates. The Credit Suisse analyst raised 2012 estimates off the back of the numbers, reiterating his Overweight on the name, trading at an attractive 9.3% 2013 FCF.

LinkedIn

Network effects abounded at LinkedIn's (LNKD) earnings call. $189mm of 1Q12 revenue and non-GAAP EPS of $0.15 easily beat most Street estimates. The business networking firm also raised guidance and announced it would be purchasing SlideShare, a professional content sharing network. Momentum in user growth continued to roll (+58% yoy). BMO's Dan Salmon is still on the sidelines as he'd like to wait and see on the firm's monetization efforts. He raised his PT to $115 from $95.

Kevin Allen at Barclays anted up his forecast after LinkedIn's, as he recommended investors pay up for above-average growth. "We believe LinkedIn can sustain significant growth and achieve margins that are as much as 2x current levels over time, and our upside case forecasts the company generating nearly $2bn in revenue and $600mn in EBITDA by 2014," he sent in a missive to investors in which where he raised his PT on the name to $125 (from $93).

IAC

Continuing on the beat-and-raise meme, the quarterly performance of InterActiveCorp (IACI) generated reverence in the analyst community. With $641M in revenues (up 39% y/y), the Internet media firm beat top line revs and EPS. Search drove most of the upside and got Credit Suisse's John Blackledge to adjust his estimates upward and raise his PT to $58 from $56.

Barclays' Mark May had this to say of IACI: "IACI has been one of the strongest and most consistent performers in our universe over the last three years, with solid double-digit growth, margin leverage, significant FCF, a diversified portfolio of Internet properties, and an aggressive share repurchase program." He thinks the growth in Search will have to abate in the near future, but still thinks the firm continues down the outperformance path. He's at $58 on his price target, as well.

CBS

CBS (CBS) started off 2012 with an impressive beat. The company reported EPS of $0.54, handily surpassing the Street's consensus estimate of $0.44. Delving deeper into the numbers, Michael Nathanson at Nomura Research believes the outperformance came from Cable Networks, "with better syndication sales and lower timing-related operating expenses.". He seems almost willing to get excited about the stock, but tempers his expectations due to disappointing TV station advertising and a historically-full valuation (its multiple trading in-line with the S&P500). He takes his numbers higher (boosting his PT $1 to $35) and worries about CBS's ability to continue to exceed expectations at this valuation.

Chris Merwin, an analyst at Barclays, liked the performance turned in at CBS's Entertainment division. The OIBDA of $411M was solidly ahead of his $373M estimate, driven by growing digital/traditional syndication revenues as well as a not-too-shabby 8% growth in ad sales. He's impressed by the momentum behind Showtime's growing catalog of original content, setting up a bright future for expanded distribution. Merwin hiked up his PT to $37(from $32) and sees room for a dividend increase in the near future.

Needham's Laura Martin is already aboard the CBS train and thinks the trip continues into 2013. She expects CBS to continue its dominance of TV (broadcast and Showtime), grow its local advertising, and return more capital to shareholders. She brings her FY12 EPS up about 5% to $2.43. The analyst has a $40 PT (up from $37) on CBS.

WebMD

Goldman Sachs was out this week on WebMD Health Corp (WBMD). The firm reported results that slightly beat analyst Drew Borst's expectations. Total revenues were $107M, which is down 19% y/y. The Internet and Media analyst sounded suspect about the firm's ability to reach his CY12 revenue targets of $500MM-$535MM after this quarter's performance. WBMD's management describes a tough environment for its Pharma clients with ad-constrained budgets, patent expirations and delayed budgeting/planning. Borst can't quite get comfortable with the name and is sticking to his Equal Weight.

Regal Entertainment

Investors liked what they saw (stock up 5%) as movie theater chain Regal Entertainment Group (RGC) demonstrated its ability to deliver upside in its margins and to deliver capital back to its shareholders. EBITDA came in at $154M, easily surpassing Barclays' analyst Bo Tang's $127M estimate. Tang enumerated three 3 reasons RGC would raise its dividend (sufficient cash, low leverage, smaller payout of FCF) and only one 1 reason it wouldn't (future M&A). He brought his target up to $16 (from $14) on the strong performance.

Janney's Tony Wible believes that Regal will also benefit from increased attendance and secular growth from the deployment of premium screens (3D, IMAX, RPX). That said, the media analyst doesn't see an upcoming catalyst and maintains his Neutral rating on RGC. He did give his fair value estimate a pop, though, bringing his target up to $15.75 (from $14) on higher estimates and an expanding multiple.

Open Table

Investors chose to dine elsewhere as they sold OpenTable (OPEN) stock down 15% Thursday after a difficult earnings report. The restaurant technology play was in-line with its revenue ($39.4M) and EPS ($0.40), but reported a seated diner growth rate of 33%, beneath the estimated growth Credit Suisse analyst, Stephen Ju was looking for. The analyst lowered his FY12 estimated modestly and brought his PT down to $50 (from $52). With growth slowing, he believes the OPEN story is now about successful integration of TopTable technology in the UK.

Valassis

Valassis Communications (VCI) turned in what BMO Capital analyst Dan Salmon called, "more than a choppy quarter.". The eCommerce marketing service provider announced $67M in EBITDA, shy of the analyst's estimate of $67.6M and the Street's $70.5M. The company maintained guidance, calling for EPS of $3.97. Sounding frustrated in a note to investors, the analyst had to bring down his PT to $23 (from $28) but still thinks a 17% FCF yield should get investors excited on the name. He's OUTPERFORM on VCI.

Amazon

By most accounts, Amazon.com (AMZN) had a pretty darn good Q1. Revenues were $13.2B, up 34% y/y. While analysts hailed the firm's performance, its guidance was a bit soft. Listen, according to Credit Suisse's Spencer Wang, the firm is still in "investment mode," according to Credit Suisse's Spencer Wang, evidenced by its segment operating income margin forecast of about 1.2%.

But the analyst sees signs of increased leverage in the firm's 3P and AWS offerings. He likes the stock, but also thinks it's too rich. He'd like to see a pullback before getting into what he deems a "core holding" in the industry.

Not all analysts see AMZN this way. According to Barclays' Perry Gold, "The stock is expensive relative to profitability, but with secular tailwinds, AMZN revenue growth may well satisfy investors for multiple quarters to come." He also likes the firm's progress on Kindle, AWS, and 3rd party nit sales growth.

JP Morgan's Doug Anmuth has been a champion of the stock, and his enthusiasm continues as AMZN continues to gain "significant" share in eCommerce. In a research note to investors, the analyst sounded impressed with the firm's revenue growth, despite the fact that 39% of unit sales came from third-parties (3P). He took his 12 month PT to $250 from $210.

Zynga

Analysts diverge in their reading of the tea leaves on the recent IPO of, Zynga (ZNGA). The casual gaming leader topped Q1 estimates ($329M in revs), but according to Mark May at Barclays, gave disappointing guidance. The negative earnings revision, lock-up expirations, and lower-than-optimal organic growth forced him to lower his PT to $10 (from $11).

Taking the other side of the argument, JPM's Doug Anmuth gave investors four reasons to like ZNGA at these levels (down 30% over the past month): 1) all user metrics improved in Q1, 2) gaining traction in mobile, 3) investor reaction over the Draw Something acquisition is overly negative, and 4) an attractive valuation (9x his 2013 EBITDA). He's upgrading his firm's recommendation to Overweight with a $14 target. We'll see which analyst wins…

Expedia

JPM's Doug Anmuth and his team must have been on an upgrade kick as the researchers also upgraded online travel agency, Expedia (EXPE) to Neutral. EXPE beat expectations on strong hotel bookings growth and higher air ticket volumes. Buoyed by a 20M share buyback authorization, JPM's Internet analysts raised their PT for the firm to $37 (from $31).

Anthony DiClemente of Barclays also pumped up his PT (this time to $34 from $31). "The company is beginning to see material upside from increased conversions in its hotel business coming from its new technology platform,"" he explained in an email to investors. Most impressive was that room nights grew 24% y/y, led by 37% growth at Hotels.com. While Air and Packages remain a "structural challenge,", the analyst is "incrementally more positive.".

CS's Stephen Ju isn't buying into the EXPE love-fest. He thinks the franchise continues to lag competitors in hotel additions and growth of Priceline's (PCLN) Bookings.com in North America may present "a longer-term tactical problem". While he admits the valuation may be undemanding, he's still Neutral on the stock.

Speaking of Priceline and Bookings.com, Ju believes the online travel juggernaut likely added over 20,000 hotels to the platform in Q1. It's this inventory boost that the analyst credits with a raise of his PT to $811 (from $790).

Netflix

This quarter marks a significant change in analyst sentiment towards Netflix (NFLX), crashing expectations and estimates along the way. The previously high-flying media company has shifted its business model away from DVD rentals to online streaming and, in the process, many analyst have soured on the opportunity. While Q1 domestic sub growth was better than expected, management's Q2 guidance of 500k net adds was well below expectations. Janney's Tony Wible, a long term NFLX bear, continues to be proven right as the stock is down almost 65% over the past 12 months. He sees more downside as he expects international losses to continue and increased risks to NFLX over the horizon from competitor initiatives and Usage-Based Billing.

Barclays lowered its EPS estimates and came out with a new $95 price target. JPMorgan also took down its PT to $87, needing to see better churn numbers to get more constructive on the name.

One of the big NFLX bulls, Credit Suisse analyst John Blackledge, took his PT all the way down to $115 (from $140) as the continued backlash from pricing changes and international losses overshadow what he believes is an "unchanged" opportunity. He believes competitive positioning is still strong for NFLX.

DreamWorks

If NFLX is experiencing a turn in analyst sentiment, the bears have already had their way with DreamWorks Animation (DWA). The firm, whose stock is down over 30% over the last year, may have put up better EPS numbers than Goldman Sachs analyst Drew Borst expected, but its revenue disappointed. Home video was the culprit, despite a strong showing by Puss'n Boots. Like Janney's Wible, Borst doesn't like much of what is going on at DWA and is maintaining his Sell. Wible still feels like the decay in the firm's film franchise and weaker performance of recent films bodes poorly for the stock.