Nomura Securities on U.S. Media: Earnings Preview - There's Something Happening Here Part II
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Rating Summary:
14 Buy, 24 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Nomura Securities on U.S. Media: Earnings Preview - There's Something Happening Here Part II
Analyst, Michael Nathanson, said, "Time Warner (NYSE: TWX): Lowering 4Q Estimates on Box Office Underperformance - We are reducing our Time Warner 4Q11 EPS by a penny to $0.87 due to lower box office and slower advertising at Networks offset by cost reductions. We are reducing Film offset by higher Networks and unchanged Publishing estimates leading to lower total company EBIT growth of 16.9% (vs. 18.7% previously). We are decreasing our advertising estimates to incorporate the ratings weakness and slower scatter trends at Networks and now project ad growth of 3% (vs. 7% previously) with US growth of 2% and int’l growth of 8%. However, we are reducing our programming expenses to -3% Y/Y and S,G&A to -2% Y/Y, which is enough to offset the ad declines and increases our Cable Network EBIT growth of 25% Y/Y (vs. 22% previously) with margins expansion of 500bps."
"Film should be a mixed bag with a strong home video release slate (including Harry Potter and Hangover 2) and video games offset by underperformance at the box office from some of its key holiday releases, including Happy Feet 2. The company will also recognize $50mn of profits from the Netflix/CW deal in the quarter. Flowing through these adjustments, we are decreasing our Film EBIT growth to 2% (vs. 14% previously). At Publishing, we are maintaining our EBIT growth of 13% with -2% advertising declines and a -1% decline in subscription revenue. However, Publishing will benefit from easier comparisons of $39mn in restructuring last year. We forecast another $1.4bn of share repurchases in 4Q."
"Viacom (NYSE: VIA) (NYSE: VIA-B): Lowering F1Q EPS by $0.03 - Viacom will report F1Q12 earnings before the market opens on Thursday, February 2. We are decreasing our estimates further following the revisions we made on November 30 (Didn’t We Almost Have It All?) to account for Nick’s ratings issues. While we are leaving our F1Q U.S. ad growth projections unchanged at 3%, we are decreasing our international ad growth by 100bps to 2% in the quarter to reflect the negative F/X headwind. We are also decreasing Cable Network ancillary revenue from 3% growth to a -4% decline due to continued weakness in the TV DVD market. Affiliate fee (estimated 15% growth) will benefit from incremental digital revenue in the quarter. We now expect Cable Network EBIT growth of 6.3% (vs. 8% previously) with margins flattish. On Filmed Entertainment, we are modestly reducing our projected loss to -$50mn (from - $43mn previously) to account for the weakness at the end of the quarter from The Adventures of Tin Tin. However, this was largely offset by strong performances from MI4 and Paranormal Activity 3. Flowing through these changes and some below the line adjustments, we are decreasing our F1QE EPS by $0.03 to $1.03. We are maintaining our FY12 ad growth estimate of 3% but reducing FY12E EPS to $4.32 after flowing through F1Q changes."
Analyst, Michael Nathanson, said, "Time Warner (NYSE: TWX): Lowering 4Q Estimates on Box Office Underperformance - We are reducing our Time Warner 4Q11 EPS by a penny to $0.87 due to lower box office and slower advertising at Networks offset by cost reductions. We are reducing Film offset by higher Networks and unchanged Publishing estimates leading to lower total company EBIT growth of 16.9% (vs. 18.7% previously). We are decreasing our advertising estimates to incorporate the ratings weakness and slower scatter trends at Networks and now project ad growth of 3% (vs. 7% previously) with US growth of 2% and int’l growth of 8%. However, we are reducing our programming expenses to -3% Y/Y and S,G&A to -2% Y/Y, which is enough to offset the ad declines and increases our Cable Network EBIT growth of 25% Y/Y (vs. 22% previously) with margins expansion of 500bps."
"Film should be a mixed bag with a strong home video release slate (including Harry Potter and Hangover 2) and video games offset by underperformance at the box office from some of its key holiday releases, including Happy Feet 2. The company will also recognize $50mn of profits from the Netflix/CW deal in the quarter. Flowing through these adjustments, we are decreasing our Film EBIT growth to 2% (vs. 14% previously). At Publishing, we are maintaining our EBIT growth of 13% with -2% advertising declines and a -1% decline in subscription revenue. However, Publishing will benefit from easier comparisons of $39mn in restructuring last year. We forecast another $1.4bn of share repurchases in 4Q."
"Viacom (NYSE: VIA) (NYSE: VIA-B): Lowering F1Q EPS by $0.03 - Viacom will report F1Q12 earnings before the market opens on Thursday, February 2. We are decreasing our estimates further following the revisions we made on November 30 (Didn’t We Almost Have It All?) to account for Nick’s ratings issues. While we are leaving our F1Q U.S. ad growth projections unchanged at 3%, we are decreasing our international ad growth by 100bps to 2% in the quarter to reflect the negative F/X headwind. We are also decreasing Cable Network ancillary revenue from 3% growth to a -4% decline due to continued weakness in the TV DVD market. Affiliate fee (estimated 15% growth) will benefit from incremental digital revenue in the quarter. We now expect Cable Network EBIT growth of 6.3% (vs. 8% previously) with margins flattish. On Filmed Entertainment, we are modestly reducing our projected loss to -$50mn (from - $43mn previously) to account for the weakness at the end of the quarter from The Adventures of Tin Tin. However, this was largely offset by strong performances from MI4 and Paranormal Activity 3. Flowing through these changes and some below the line adjustments, we are decreasing our F1QE EPS by $0.03 to $1.03. We are maintaining our FY12 ad growth estimate of 3% but reducing FY12E EPS to $4.32 after flowing through F1Q changes."
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