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Published: February 24, 2012 at 09:40 AM GMT
Last Updated: February 24, 2012 at 09:40 AM GMT
With five of seven big media firms reporting, there's been relatively good earnings news, driven by a finicky and volatile film business.
DirectTV (DTV) reported mixed results for the fourth quarter of 2011. Net additions to the subscriber base and EBITDA came in OK but Direct TV Latin America was the star of the show, hitting or exceeding all expectations. On the domestic side of operations, DTV added 125k subs and posted revenue of $6.03 billion, with better ARPU driving the numbers. But south of the border, things were on fire -- DTV added 590k net additions and revenues of $1.37 billion, beating Credit Suisse's estimates for both metrics.
"We view DTV's new strategic focus in the US as appropriate given the maturity, and competitive nature, of the pay TV business," wrote Stefan Anninger, the firm's DTV analyst. He's got a Neutral rating on the stock. The stock closed the day down 2% to 45.38.
Investors discovered that while quarterly performance was solid from Discovery Communications (DISCA), it wasn't enough to move the stock higher. Barclay's Anthony DiClemente saw fireworks, though, calling DISCA's 17% domestic ad growth "best-in-show". The 2012 outlook presented by the company came in mixed -- better revenue forecasts but weaker profits. The firm's core business appears intact and there's more uncertainty surrounding its JV networks, OWN and The Hub, according to DiClemente.
Discovery did buy back $265M of stock in the quarter which sounds good but isn't as aggressive as its competitors in returning capital. DiClemente has a $45 price target on the stock. Goldman Sachs analyst, Drew Borst seemed troubled by the cost of rising international revenues (19% top line growth but smaller margins contributed to EBITDA miss). Needham's Laura Martin saw the quarter come in similarly and is sticking with her HOLD rating while CS's Michael Senno seemed encouraged by the top-line growth and raised his PT to $50 (from $45) on the quarterly showing.
Comcast (CMCSA) finished out 2011 on a high note. Credit Suisse analyst Spencer Wang was genuinely impressed by the cable unit's results (net PSU adds of 465k on the quarter, way ahead of its 333k estimate). Video sub loss of only 17k and HSD adds of 333k drove the firm's strong results, popping the stock up 7%. Throw in a 44% increase of its dividend (to $0.65/share) and 4Q performance helped convince the analyst bring up his PT for 2012 to $32 from $28.
CBS (CBS) reported 4Q11 revenue of $3.78B, down 3% y/y and below Needham's 4% forecast. EPS came in at $0.57, up 25% from the previous year. This topped Laura Martin's 9% growth estimate and got her to raise her PT from $30 to $37. CBS is her team's top stock pick for 2012 based on growth in retrans, streaming deals, international affiliates and a focus on cost controls.
DB's Matthew Chesler recommends clients to buy Omnicom (OMC) after its good finish to 2011. The agency posted in-line EPS but continues to drive revenue growth and margin expansion into 2012. He sees two years ahead of 15% yearly EPS growth. OMC continues to return cash to shareholders, raising its dividend by 20% (stock now yields 2.4%) and $700M of buybacks or 5% of equity. Barclays' Bo Tang agreed that it was a fine performance and took up his PT $4 to $50 on the back of 2012 estimates of nearly 4% organic growth.
Nomura's Michael Nathanson isn't buying the story as he sees the double-digit EPS growth being helped by share shrinkage. "We are not terribly excited about the company's investment case relative to our Buy-rated pure-play Media names," he sent out to clients of his firm.
In its first quarter as a public company, Zynga (ZNGA) proved it wasn't playing around. Results topped Barclays Mark May's estimates for the casual gaming firm and he took his rating up to an Overweight on the news. Impressive revenue growth ($307M, up 26% YoY) seemed driven by growth in mobile users and mobile paid downloads, as well as advertising revenues. May is positive on the stock and the sector. The stock's already up nearly 30% on the year.
JP Morgan's Bo Nam focused his analysis on ZNGA's portfolio diversification. Despite few major title launches for most of 2011, the gaming firm enjoyed strong sequential booking growth from titles like Poker, CityVille and Words with Friends. He remains overweight, bringing his PT up to $15, in the face of very strong price action.
The buzz this week on Yahoo was that its strategy to unlock value -- to sell of its prized Asian assets -- was looking increasingly in jeopardy. Nervous, investors bailed on the stock Wednesday, sending the shares of the Internet media firm down over 6%. With execution in question on Yahoo's strategy to divest its Asian assets tax free, the firm must make a decision quickly and get back to business, Doug Anmuth of JP Morgan recommended. His team was confident that if things went smoothly, Yahoo would be a $20 stock. Now, he sees a taxed sale bringing value up to $17-$18.
Business Insider published an exclusive interview with LinkedIn (LNKD) CEO, Jeff Weiner this week. In the interview, Weiner gives advice to other firms going public ("don't file until you're ready"), explains why mobile is LinkedIn's fastest growing business ("you're on your way to a meeting with someone for the first time, it's easy to look up who you have in common with that person"), and why there seems to be unlimited demand for new social networks ("It's interesting because you continue to see new social sites with this absolutely amazing growth"). The stock's been ripping higher, up 25% to $92 just since January 20th alone.
ComScore (SCOR) reported solid quarterly results. Revenue grew 22% YoY to $63M through strong subscription and project revenue growth. EBITDA came in especially strong, as 200+ bps growth beat consensus and Credit Suisse analyst, John Blackledge's estimates. The analyst is a believer in SCOR and expects continued growth on both top-line and bottom-line numbers. He's got an Outperform rating on the stock with a $27 point PT based on his 2012 estimates.
Web content play, Demand Media (DMD) appears it isn't seeing as much demand in its content and advertising division as analysts were expecting. The firm, which reported on Thursday, turned in net revenue, adjusted EBITDA and adjusted EPS of $81mn, $24mn and $0.08, respectively, compared to Barclays estimates of $82mn, $23mn and $0.07. The analysts there felt compelled to stick with the story in front of decelerating growth and increased need for investment to grow. Barclays' Kevin Allen thinks the stock is cheap here and sees over 50% upside from these levels.
News Corp (NWSA) continues to be beset by legal troubles. Five more reporters at News Corp's The Sun were arrested over the weekend as part of an expanding investigation into bribery of elected officials in the UK. That brings the total to nine arrests of News Corp employees over the past month. Goldman Sachs analyst, Drew Borst seems convinced of the inevitability of a continued legal battle for Rupert Murdoch's franchise, even if he were to shutter/sell all the UK newspapers its owns.
He's kind of cool on the stock in light of the +$100M (or $0.07/share) charge the company has already taken because of the investigations. Stock has been resilient in light of the investigations, up 10% YTD.
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