Media 2Q16 Preview - RBC
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Rating Summary:
20 Buy, 12 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 4 | Down: 4 | New: 2
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RBC Capital analyst, Steven Cahall, published his 2Q16 Media preview.
Media stocks are off ~3% on average relative to the S&P500, as the industry focus has shifted away from 2016 performance and toward secular trends including digital/OTT, consolidation, Brexit, and other long-term themes. While a number of large cap Media stocks have performed well YTD, the sector is still modestly valued at 12.6x CY17E P/E on average vs. the S&P500 at 16.6x.
Channel checks suggest that Ad market strength will continue into Q2 although at a slightly less feverish pace than in Q1. Strength in scatter has led some Media companies to defer make-goods, thereby monetizing the current inventory to the max. While this helps current results, it could mean a sharper correction as we approach H2 and 2017. We think the trend is more apparent in broadcast versus cable.
Earnings outlook by stock:
CBS Corporation (NYSE: CBS): Beat as CBS tracks back toward a quality multiple
Disney (NYSE: DIS): Beat but upside could be limited on bearish narrative
Discovery Communications (NASDAQ: DISCA): Brexit takes estimates down 3–5% but asymmetric upside on low expectations + high short interest.
21st Century Fox (NASDAQ: FOXA): Miss but the Q won't matter vs. FY17 discussion.
Hemisphere Media Group (NASDAQ: HMTV): Beat with a focus back to growth + M&A
Lions Gate (NYSE: LGF): $1.90 in FCF/share with Starz could bring the deal in favor.
Scripps Network (NASDAQ: SNI): We expect solid results, but with shares +18% YTD we think good news is priced in.
Time Warner Inc (NYSE: TWX): Investors should get the expected $0.05 raise that helps TWX get back to a quality multiple.
Viacom (NASDAQ: VIAB): Miss but investors may look through on corporate action.
For an analyst ratings summary and ratings history on CBS click here. For more ratings news on CBS click here.
Shares of CBS closed at $57.53 yesterday.
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