Wells Fargo Analyst Writes 'Radio Is Doing Quite Well'

Marci Ryvicker

Some positive vibes for radio are coming from WELLS FARGO SECURITIES Analyst MARCI RYVICKER in a new report. In her JULY 22nd Equity Research Newsletter to clients "Media: Checks Suggest Local Ad Is Quite Healthy." The letter covers Radio, TV and Outdoor advertising research.

She continues, "Radio is doing quite well. While not all radio groups are created equal, we were surprised at the number of execs who sound pretty good regarding trends -- with Q2 up low single digits (LSD), and Q3 ahead of that (but starting to fade)."

While it may not be "happy days are here again," RYVICKER is upbeat in writing she "had the opportunity to decipher revenue trends across traditional media and have concluded that the second quarter may have been lumpy, but at the end of the day, trends ended up -- relatively okay -- as a result, we left our core growth estimates relatively unchanged."

Detailing the solid news, she adds, "Beyond Q2 results and Q3 pacings, we think the focus of earnings calls will be on:

* M&A, as just recently, SANDUSKY RADIO was sold to HUBBARD BROADCASTING for $85.5MM (on 7/16) and NEXTMEDIA, a 33 station radio group with a small to mid-market focus, was put up for auction (press reports estimate the group could be worth ~$80MM);

* The potential for further format changes given the many 'flips' we have seen in the recent past;

* Any competitive effects to the 'sports network' landscape post 'CBS SPORTS RADIO,' which launched full programming
on JANUARY 2nd, 2013;

* The potential for shareholder returns -- we note that ETM is focused on utilizing free cash to pay-down debt rather than enact capital returns; at least until its leverage ratio is within its 4-4.5x ‘comfort range’, which we currently estimate is a 2014 event.

* Competition; especially commentary on internet radio providers such as PANDORA;

* The potential impact of new royalty agreements (CLEAR CHANNEL signed agreements with WIND-UP RECORDS, ZOJAK WORLD WIDE ARTISTS, FEARLESS RECORDS, DUALTONE and FLEETWOOD MAC in Q2);

* The progress of NEXTRADIO -- which is the receiver application for FM and HD Radio enabled smartphones announced 1/8/13 with SPRINT (J. FRITZSCHE); and the potential upside should it perform well (we think it could) and;

* The growth of digital radio, and any efforts to further monetize that business."

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