Nomura Securities on U.S. Advertising – As Clear As Mud: Why We Believe Things Are Different This Time
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Up: 8 | Down: 5 | New: 26
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Nomura Securities on U.S. Advertising – As Clear As Mud: Why We Believe Things Are Different This Time by Michael Nathanson
Nathanson said, "Looking backwards, ad growth remains bifurcated and decelerating. Second quarter ad growth, as measured by the Nomura Ad Tracker, grew +6.8%, down 150bps sequentially from 1Q. Despite the deceleration, total advertising growth was still solid led by double-digit strength at Cable Networks and Online. Excluding Online (up nearly 17%), growth in traditional media advertising slowed to +3.5%, down 190bps after a 420bps slowdown in 1Q...Overall 2Q ad growth of +6.8% was just slightly below our +7.2% estimate due to the strength of online that came in higher...Our national TV channel checks confirm a pretty slow August for ad demand after a moderate July."
"While just reported 2Q11 GDP growth remains anemic at 1%, we still believe it is too early to call for another steep downturn in the advertising market...That said, we believe it is important to differentiate how a potential slowdown this time could be very different from last time. We see five significant differences: 1. The current U.S. economy is unlikely to reexperience the massive credit-led collapse of 2008; 2. Ad spend to GDP ratios remain near historically low levels; 3. Ad spending for key ad sectors like Autos, Retail, and Financials never recovered – still down in the low teens vs. pre-2008/09 recession levels; 4. The composition of spending has materially changed with secularly challenged print media now a much smaller contributor; 5. U.S. auto sales now stand at 12mn annually – 4mn below the prior peak. Also, GM (NYSE: GM) and Chrysler don’t appear to be headed into bankruptcy this time around."
"We have updated our U.S. ad estimates. 2011 growth is reduced from +3.6% to +3.3% and 2012 is reduced from +5.0% to 4.5%. For ‘11, we have raised our estimate for Online, offset slightly by lower Local Stations, Outdoor and Magazines. For ‘12 projections, we maintain our forecasts for national TV but temper our expectations for local advertising trends and print."
Stocks of Note: Time Warner (NYSE: TWX) Time Warner Cable (NYSE: TWC), Comcast (Nasdaq: CMCSK), Scripps (NYSE: SNI), Westwood One (Nasdaq: WWON), CBS (NYSE: CBS), Discovery (Nasdaq: DISCA), Viacom (NYSE: VIA-B), Disney (NYSE: DIS), Sirius XM (Nasdaq: SIRI), & Outdoor Channel Holdings (Nasdaq: OUTD)
Nathanson said, "Looking backwards, ad growth remains bifurcated and decelerating. Second quarter ad growth, as measured by the Nomura Ad Tracker, grew +6.8%, down 150bps sequentially from 1Q. Despite the deceleration, total advertising growth was still solid led by double-digit strength at Cable Networks and Online. Excluding Online (up nearly 17%), growth in traditional media advertising slowed to +3.5%, down 190bps after a 420bps slowdown in 1Q...Overall 2Q ad growth of +6.8% was just slightly below our +7.2% estimate due to the strength of online that came in higher...Our national TV channel checks confirm a pretty slow August for ad demand after a moderate July."
"While just reported 2Q11 GDP growth remains anemic at 1%, we still believe it is too early to call for another steep downturn in the advertising market...That said, we believe it is important to differentiate how a potential slowdown this time could be very different from last time. We see five significant differences: 1. The current U.S. economy is unlikely to reexperience the massive credit-led collapse of 2008; 2. Ad spend to GDP ratios remain near historically low levels; 3. Ad spending for key ad sectors like Autos, Retail, and Financials never recovered – still down in the low teens vs. pre-2008/09 recession levels; 4. The composition of spending has materially changed with secularly challenged print media now a much smaller contributor; 5. U.S. auto sales now stand at 12mn annually – 4mn below the prior peak. Also, GM (NYSE: GM) and Chrysler don’t appear to be headed into bankruptcy this time around."
"We have updated our U.S. ad estimates. 2011 growth is reduced from +3.6% to +3.3% and 2012 is reduced from +5.0% to 4.5%. For ‘11, we have raised our estimate for Online, offset slightly by lower Local Stations, Outdoor and Magazines. For ‘12 projections, we maintain our forecasts for national TV but temper our expectations for local advertising trends and print."
Stocks of Note: Time Warner (NYSE: TWX) Time Warner Cable (NYSE: TWC), Comcast (Nasdaq: CMCSK), Scripps (NYSE: SNI), Westwood One (Nasdaq: WWON), CBS (NYSE: CBS), Discovery (Nasdaq: DISCA), Viacom (NYSE: VIA-B), Disney (NYSE: DIS), Sirius XM (Nasdaq: SIRI), & Outdoor Channel Holdings (Nasdaq: OUTD)
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