After continued financial woes in 1992 – a year o" data-categories = "" data-popup = "" data-ads = "Yes" data-company = "[]" data-outstream = "yes" data-auth = "" >

SIGNS OF LIFE — Wall Street has only modest expectations for advertising, cable and broadcast stocks this year. Still, it’s an improvement from 1992 By DAVID CARE

After continued financial woes in 1992 – a year o

Interpublic chairman Phil Geier, for one, sees ‘a tough first six months,’ with ad spending in the U.S. creeping up 6-6.5% for the year. Wall Street has similar projections, but Geier’s subordinate, McCannErickson forecaster Bob Coen, predicts a 6.9% rise.
Of course, no company’s fortunes slavishly track the economy. Which firms catch fire or cool off in 1993 also depends on the vicissitudes of regulation and technology, the war between established and newer media, and old-fashioned gamesmanship. Here’s how Wall Street handicaps the players:
Cable – No media stocks have been hotter than Turner Broadcasting, Viacom and other cable programmers. Congress handed programmers a plum when it broke the viselike hold of cable system operators such as Tele-Communications Inc. and Time Warner over access to popular shows. The cable reregulation law passed last fall makes programming freely available to cable’s rivals. All past challenges to cable have failed, but technological advances may give the law teeth. Late last year, a promising microwave technology had a successful test run in Brooklyn, N.Y., and Hughes Communications announced it would launch two direct-broadcast satellites by early 1994. TCI countered with a pr blitz, saying it would unveil digital-compression technology to boost capacity on its systems to 500 channels. Still, non-cable competitors aren’t blocked from using the technology, which TCI neither developed nor owns. ‘The assumption that cable will maintain its monopoly for long and be the sole domain of pay-per-view is erroneous,’ says Tom Wolzien of the Wall Street firm Sanford C. Bernstein. Meanwhile, the cable law’s rate-hike controls don’t appear onerous. This year, programmers and operators alike can look forward to a more than 10% jump in ad revenues, the biggest for all media.
Betting line – Inroads overseas and channel roll-outs will lift results at Turner (currently priced at $22 1/2 per share) and Viacom (42 1/2). Wolzien is upbeat on both stocks despite their price. Also expanding abroad is TCI (22), whose shares get a nod from Donaldson Lufkin Jenrette’s Dennis Leibowitz.
Broadcasters – If the giant networks are dinosaurs, they’re a ways from extinction. Last year, CBS vaulted to No. 1 in the ratings while NBC’s viewership nosedived. Broadcasting’s big story, though, was Fox. Having muscled its way to a 13% average share on the nights it airs, the 5-year-old network ‘is having as big an impact on advertising revenues of the Big Three as all the cable networks combined,’ says media industry consultant Paul Bortz. Competition for the majors is intensifying. Fox will expand from six to seven nights this month, and independently produced miniseries are proliferating. By mid-decade, predicts Bortz, the networks’ audience share will drop to 55% from the current 60%. Ad revenues ought to inch up 2-4% this year.
Betting line – DLJ’s endorsement of Capital Cities/ABC (493 3/4) is a rarity. Salomon Brothers analyst Ed Atorino, ‘neutral’ on networks’ stocks, voices the prevailing view: ‘The networks are like a bucket of water that others are punching holes in and the dollars are draining out.’ Fox’s parent, News Corp. (36 7/8), remains a Wall Street favorite.
Advertising – Bob Coen isn’t alone in his optimism. Says PaineWebber analyst Alan Gottesman, ‘If we see earnings surprises, I think it will be on the upside. The forces for an upturn are building and things could turn very quickly.’ Still, the economic slump in Europe and Japan could hobble multinational agency combines like Interpublic and Omnicom. A wild card is whether the billions of dollars sucked out of advertising and into trade promotion will filter back. Interpublic’s Geier is hopeful, and contends that companies which leaned defensively on trade spending to safeguard brands in lean times will rely more on advertising to ‘re-energize their brand power’ as the recession abates. But Wall Street suspects the promotion craze won’t fade.
Betting line – If Interpublic is the Mercedes of agency stocks, think of Omnicom as Lexus. Better known for its creative eclat than Interpublic, Omnicom is starting to garner the sort of esteem Interpublic has long commanded as a blue-chip investing vehicle. But worried over the blow dealt Interpublic when Michael Ovitz spirited away some Coke business, Wall Street deems Omnicom (40 1/8) the smarter buy. Foote, Cone & Belding (30 1/4) has its endorsers, while financially revamped WPP remains a must to avoid.
Copyright Adweek L.P. (1993)