E.W. Scripps: No Sign of Weakness Yet at Cable Networks

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E.W. Scripps (SSP) reported earnings in line with consensus but stronger than I had been anticipating. I came quite close to buying October or November at the money puts yesterday but in the end I decided against. As noted in my preview comment, I have a growing concern that fundamentals of the cable network business are deteriorating more than the Street is willing to admit. If this theory proves correct, the ramifications for the stocks of SSP and other major cable network owners (Viacom, Time Warner, Disney, News Corp) could be significant as most analysts are assuming a 13-14 times EBITDA multiple in their valuation models for cable network assets. I still believe my theory could play out in 1H06 but as far as SSP is concerned 3Q05 was another quarter of excellent results for the company’s cable networks with no signs of weakness….

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Tribune: Addressing Unique Issues But Industry Challenges Remain

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Tribune (TRB) are up over 2% since reporting 3Q05 earnings and conducting a conference call on Thursday morning before the open. The key takeaway from the report and call is that TRB is putting its unique issues in the past and the company’s fortunes will begin to closely track the newspaper industry. Given poor trends in the industry, the lack of any signs of improving advertising or circulation growth, and multiples that still remain at historic averages, things really aren

Gannett 1Q Results: Nothing To Get Excited About

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Gannett (GCI) shares initially bounced about 1% off of depressed levels in response to the company’s 3Q05 earnings report before retreating to new lows as the market fell on Tuesday and Wednesday. The quarter was pretty much in line with expectations and no unexpected news came out on the conference call….

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Extra, Extra: Newspaper Stocks Face Long-Term Challenges

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Quick Summary:

  • Earnings estimates have come down steadily all year and several companies have pre-announced earnings misses for 3Q05.
  • The stocks should be trading well below historical multiples even if you believe that certain issues are cyclical.
  • It is still too soon to take long positions in the group even though most of the stocks are trading close to 52 week lows
    Newspaper companies are among the first to report quarterly earnings. This week I will be listening to conference calls from Gannett (GCI), Tribune (TRB), E.W. Scripps (SSP) and Knight Ridder (KRI)….

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    • M&A Might Drive Interest in Media Stocks

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    Monday’s close on the S&P 500 was the lowest since May 18th. That is not what I wanted to talk about today but I was a little surprised as I scanned back that I had to go back almost five months to find the last lower close. Ouch. Bye-bye to all those summer gains.
    I received a note from Aryeh Bourkoff, the excellent cable analyst at UBS, yesterday which noted Belgium’s largest cable company, Telenet, completed an IPO. While the pricing was at the low end of the range, the multiple was a healthy at 10 times 2006 estimated EBITDA. This marks the second deal in European cable since I posted last week about European media M&A. Late last week, bankrupt German cable company PrimaCom sold its Dutch cable business to Warburg Pincus for over 10 times projected 2006 EBITDA. Previously, I noted that Liberty Global (LBTYA) paid over 10 times EBITDA for leading Swiss cable outfit Cablecom. And of course, the long awaited NTL-Telewest merger was announced on October 3rd. While UK cable trades at just 6 times EBITDA and the NTL deal was greeted with a shrug by investors, a deal is a deal….

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    Japan On the Mend: Going Long

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    Shortly after the open Thursday, I completed the purchase of a position in the Japanese stock market across all client accounts. The purchase was completed through the exchange traded fund that tracks the major Japanese market index. The ticker symbol is EWJ. Certain clients had owned Japan previously as part of a group of ETFs designed to broadly track global market trends. Those positions are in the buy and hold mode. The most recent purchase is based on the assumption that excellent profits are available over the next six to twelve months….

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    SBS Broadcasting Shareholders Approve Sale of Company

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    On Monday, SBS Broadcasting (SBTV) shareholders approved the deal to sell the company to private equity investors for 46 euros per share. According to the press release issued by the company, the deal is expected to close in late October. Sometime later this month, before final closing, the company will establish a record date for the liquidation distribution. The Euro-U.S. dollar exchange rate on this date will determine the ultimate price that U.S.-based investors who participate in the tender offer will receive….

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    Recent European M&A is Good News For Central European Media Enterprises

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    Consolidation in European media continues at a frantic pace. Last week, Liberty Global (LBTYA) announced its acquisition of leading Swiss cable company Cablecom. On Monday, NTL Incorporated (NTLI) and Telewest (TLWT) announced their long awaited merger. Additionally on Monday, shareholders of SBS Broadcasting (SBTV) approved the sale of the company to private equity investors for 46 euro per share. Finally, on Sept. 30, Scandinavian company Modern Times Group announced the purchase of 50% of TV Prima, the No. 2 television broadcaster in the Czech Republic….

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    NTL and Telewest Finally Announce Merger

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    The following entry appeared in its entirety on StreetInsight.com on October 5, 2005.
    NTL Incorporated (NTLI) and Telewest (TLWT) announced their long awaited and long overdue merger on Monday. The terms were about as expected with TLWT shareholders receiving value of almost $24 per share composed of $16.25 in cash plus .115 shares of NTLI. I like the deal and I am surprised by the sell-off in NTLI shares since the deal was announced. I do not own a position in NTLI presently but if the shares go much lower I will probably re-enter on the long side (I still own NTLIW

    October 2005 Model Signals

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    Over the weekend I received fresh signals from Northlake’s monthly models. The big change for October is a new Value signal in the Style model after four consecutive months signaling Growth. As a result of the new signal, at the open on Monday I swapped all personal and client positions in the Russell 1000 Growth ETF (IWF) and the Russell 2000 Growth ETF (IWO) into the Russell 1000 Value ETF (IWD) and the Russell 2000 Value ETF (IWN). The prior fourth month run of growth signals proved profitable for clients as IWF was sold for a gain of 3.2% and IWO was sold for a gain of 6.2%. During this time period the S&P 500 rose approximately 3.2%….

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