Great Quarter and Guidance for CETV

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Central European Media Enterprises (CETV) reported outstanding 1Q08 results and simultaneously issued 2008 guidance well above most analyst estimates. The shares responded very favorably, rising over 9%. I think the stock can easily reach $130 this year and based on longer term projections I think a double remains a distinct possibility.
In 1Q, CETV reported revenues of $223 million and EBITDA of $75 million. Revenues grew 51% and EBITDA grew an astounding 86%. Management stated that currency may have added 20% to the growth rates (100% of CETV’s operations are in Central Europe). By country, Organic revenue growth ranged from 20-40% and organic EBITDA growth ranged from 25-50%. CETV may have also received further benefit from an ad sales strategy that is attempting to smooth seasonality. In Europe 1Q and 3Q are seasonally weak. Some sales may have been pulled forward from 2Q but I suspect it was not particularly significant. The bottom line is that core organic growth at CETV is superb due to healthy markets and superior operating management.
Results beat my expectations pretty much across the board. The Czech Republic, CETV’s largest market, had the biggest upside surprise with 66% revenue growth and 7% EBITDA growth. Romania, CETV’s #2 market, also had a material upside surprise. The other big positive was in Croatia which enjoyed 60% revenue growth as CETV’s station moved to #1 in ratings.
CETV’s 2008 guidance is for $1.1 billion in revenue and $440 million in segment broadcast EBITDA. CETV also guided to a $15 million EBITDA loss in its burgeoning internet efforts. This guidance was at the very high end of published estimates and well above consensus….

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Great News From CETV: Pre-Call Thoughts

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My long-time and still favorite media stock, Central European Media Enterprises (CETV), reported much better than expected 1Q08 results this morning. Even better 2008 guidance is way above most analyst estimates (though not far off my own numbers). I’ll be back with more after the conference call but the shares are deservedly trading up 9% in this morning. Plenty more upside exists to at least $130 on 2008 results. Cramer is going to be real happy he recommended CETV on Mad Money two weeks ago. I am also happy that I’ve learned to ignore the very high daily volatility in CETV shares and keep my eye on the big picture.

Excellent Quarter For Rogers

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On Tuesday, Rogers Communications reported excellent 1Q08 results further allaying concerns that caused the shares to pullback from the low $50s before bottoming in the low $30s. Results at RCI’s wireless business segment were better than expected across the board, providing plenty of support for the recent rebound in the shares to the low $40s and leaving room for additional near-term upside to $46-48. RCI also announced that it will rollout the iPhone in Canada later this year providing a superb weapon as competitoin in Canadian wireless heats up.
The only chink in the armor from the report came during the conference call when Ted Rogers repeatedly mentioned that RCI was beginning to feel the impact of the US recession and expected the impact to grow. Thus far, only collections have suffered as demand for wireless and cable services has held firm. To its credit management is already responding so I expect the financial effect to be modest but it does provide bears with a talking point.
There are further comments on the stock price below but this report was correctly greeted by a 4% jump in RCI shares to their highest close since January 3rd. Worries over increasing competition and slowing growth in the Canadian wireless market and RCI’s vulnerability as the dominant industry leader have been proven wrong so far. More upside lies ahead for RCI shares, especially with introduction of the iPhone.
In 1Q, RCI enjoyed 14% revenue growth, 21% EBITDA growth, and reported EPS 2 cents ahead of expectations….

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CBS: Another Unimpressive Quarter

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CBS shares popped nicely upward following its 1Q08 earnings report. Results exceeded analyst estimates and were accompanied by an 8% dividend boost. Despite the better than expected results, management only reiterated guidance. Either they are playing it conservative or they are implying that trends for the remainder of they ear may be a little below plan. The dividend increase suggests they are being conservative and the stock action indicates this is what investors believe.
Despite the positive reaction, I was not impressed by the results. EPS of 40 cents did beat consensus for 34 cents and flat revenue and 8% EBITDA growth were also better than expected. However, the source of the upside surprise was low quality. First, costs were lower, boosting free cash as well, due to the writer’s strike. This was a commonly discussed topic during the strike but apparently analysts did not incorporate enough savings into their models. Second, syndication sales of CSI and Everybody Loves Raymond drove this division to an 85% revenue gain in a high margin business. CSI benefited form a shift form outside to inside distribution while Raymond sold a few more seasons. CSI may prove repeatable assuming analysts had not placed the distribution shift in their models. Raymond appears to be a timing issue with anticipated revenues being pulled forward.
Away from these positive surprises, trends were lackluster….

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Regal Catches A Downgrade Off Average Quarter

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As I mentioned yesterday, former Northlake long Regal Entertainment shares caught a downgrade after reporting an inline quarter late last week. The stock moved up the first day but after the downgrade on Friday more than eliminated the gains. I have yet to read the downgrade but I suspect it had to do with the loss of fundamental momentum due to the stiff box office comparisons from May through August. RGC will show good growth this year thanks to acquisitions, a growing contribution from its partial ownership of National Cinemedia (NCMI), and a 53 week year (the extra week is a holiday week and could add 7-8% to EBITDA for the year). However, organic growth will be limited because to the comparison to last summers record-breaking summer box office….

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Scripps Gets Media Earnings Off On The Right Foot

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Earnings season for media companies began in earnest last week and really picks up this week. Among major companies, CBS, Time Warner, Viacom, and Comcast report this week. Smaller companies reporting include Northlake long positions Rogers Communications and Central European Media Enterprises, as well as Dreamworks Animation.
There were a couple of noteworthy reports last week that led to significant stock price reactions. On the plus side, E.W. Scripps (SSP) reported better than expected results and saw its shares rise over 2%. On the negative side, Regal Entertainment (RGC) reported in line results but caught a downgrade that led the shares to drop almost 4% on Friday. I’ll provide more comments on RGC tomorrow.
Results from SSP were favorable at the company’s growth business including cable networks and online. HGTV and Food Network rode strong ratings to better than expected advertising gains. Especially encouraging was a growing contribution from newer networks like DIY and Fine Living….

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NII Holdings: Another Solid Quarter Supports More Stock Recovery

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NII Holdings (NIHD) 1Q08 results were at the high end of expectations pretty much across the board. Given many worries that had cut the stock in half in the last six months, the results provided relief. The shares rose 8% yesterday, building on a recovery that is now approaching 50% from the February low. I think there is plenty more to come.
NIHD reported revenue, EPS, EBITDA, and subscriber growth of 39%, 35%, 36%, and 35%, respectively. Each figure tracks above full year guidance for 30% growth. NIHD trades about 7 times my 2008 EBITDA expectation and less than 15 times consensus earnings estimate. For 30% growth and a history of superb execution, I think that is pretty cheap. Granted the valuation is in line with other emerging markets wireless companies but until worries emerged over competition in NIHD’s largest market, Mexico, and in its technology platform (iDEN), the shares traded at twice its peer group valuation.
This is the second consecutive quarter of good results since the fears manifested last summer and fall. I think some of the premium will return as the company kicks out another few quarters of solid results showing 30% plus growth. The need to upgrade current networks and add spectrum means that the company will be spending several billion in capital starting within a year but the balance sheet is solid with net debt to EBITDA at just 0.5 times my 2009 estimate. I think the shares will work steadily higher given a decent market toward my near-term target of $60. I am considering averaging down again, an opportunity that might present itself when the market is weak and the company bids for spectrum and/or formally announces its network upgrade.

Apple Earnings Set The Stage For More Share Price Upside

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Apple reported excellent 2Q08 results with revenues and EPS exceeding estimates. Guidance is good by Apple standards with revenues above street estimates and EPS just 10 cents below the street. Analysts and investors will pick apart the numbers and conference call commentary but the bottom line is that this quarter, the conference call, and the guidance provide little to no ammunition for the bears. While there is similarly little for the bulls, especially in the short run, the fact that the bears can take away little makes this a win for the bulls – of which I count myself one.
This commentary and what follows is very consistent with my first impressions which I posted as soon as the numbers were released but before the call started. The bottom line, for the short-term, is what I noted in my first comment, “this stock is not going back to $120 but it isn’t going to see $200 either.” Here’s all the details in four times the number of words Apple used in their press release….

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Apple: After Earnings, Before The Call

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Here is the series of posts I made on RealMoney.com yesterday after crunching Apple’s numbers but before the conference call Q&A started:
4:49 PM EST: Good and and I like the guidance being in line with consensus. Tax rate was low adding 4 cents to EPS. That probably is why the stock has pulled back. iPhone at 1.7 million is on th low end. Gross margins did not surprise to the upside so operating margins not as good as hoped but top line offset thanks to Macs. iPod units fine but ASPs not up that big so it was probably the shuffle price cut. More later but I’d say this is a win for the bulls because it takes away potential form the bears. I wouldn’t expect a huge response form the stock in either direction unless the conference call surprises. In the near-term, this stock is not going back to $120 but it isn’t going to see $200 either.
5:08 PM EST: Stock now down a bit. Guidance on revenues is inline. EPS guidance is $1.00 vs. consensus of $1.10. Consensus was looking for 3% sequential revenue growth in June but guidance is for -4%. That of course is only a problem because 2Q revs were well ahead of expectations. My spreadsheet suggests June quarter guidance is conservative unless management is expecting a major step down in yoy notebook sales growth rate. That is doubtful given momentum, market share gains, and past sequential performance.
I suppose the lack of a blowout in the March quarter may have caused some consternation. I stand by my first impression: very solid quarter and guidance with little for the bears but not enough for the bulls in the short-term. I plan to hold my shares and will add in new accounts at current prices now that the quarter is out of the way.
5:33 PM EST: I should have noted this in prior quarters but Apple’s press release is only 238 words. I challenge subscribers and contributors to find a similarly short press release from such a meaningful company or any company. And my editors (and readers) can just ignore the jokes about my word counts!!!!

Keeping An Eye On Gannett

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It is has been a long fall from grace for Gannett. Still regarded as one of the best managed media companies and clearly regarded as the best managed newspaper company, GCI’s 1Q08 earnings report came and went with barely a notice. I suppose that is not all bad since the numbers were no good and the shares have sunk back to multiyear lows since the report.
I still keep a close eye on GCI because of its strong management and what looks like a ridiculously cheap stock. Granted GCI is in a declining annual EPS trend buy current estimates for 2008 are close to $4.00, putting the shares at a measly 7 times EPS. On the industry standard EBITDA multiple, the shares are also cheap, at just over 5 times 2008 estimates. GCI shares have a current yield of 5.7% with a dividend that looks secure at just a 40% payout ratio. Amazingly, GCI shares are one of the cheaper in the group despite its highly regarded management and lightly levered balance sheet.
Trends at GCI aren’t different form the other newspapers. The three pillars of classified advertising, help wanted, auto, and real estate are dropping sharply for secular and cyclical reasons. GCI shares took its earnings particularly hard because management said its trends worsened in March with the second half of the month particularly weak. GCI also witnessed a sharp slowing in online growth, something it shared with New York Times. Given that online revenues are supposed to grow rapidly and eventually offset declines in print advertising, this is terrible news….
Despite the lousy fundamentals, I have my eye on GCI as a long idea. The upside would come from easier comparisons later this year, the present value of what should be a 20 year stream of at least stable dividends, and the possibility that the company more aggressively returns cash to shareholders. This last point is an issue for GCI investors because the company continues to be open to acquisitions of newspaper properties.
A clear ruling out of large acquisitions and an easing of estimate cuts are the triggers for some upside. So far neither of those things is evident but just because every else is ignoring GCI doesn’t mean you should. I’m not.

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