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NEW YORK Wall Street is trying to assess the impact of the General Motors bankruptcy on media companies, and at least one analyst’s conclusions might surprise you.

Although headlines about the U.S. car industry have sounded dire, Sanford C. Bernstein analyst Michael Nathanson on Wednesday increased his fiscal-year 2010 earnings-per-share estimates on CBS, Walt Disney and News Corp. and his price targets across sector stocks. He even upgraded CBS shares to “market perform.”

“Consumer demand for new autos has rarely been this weak and at some point in 2010 will strengthen, which will strengthen local ad markets — most notably local TV stations,” he noted in a report.

Based on a 21-year regression analysis, Nathanson said growth in auto sales has explained 39 percent of the growth in auto advertising.

Auto ads declined 17 percent in 2008, with TV stations seeing an outsized 33 percent drop. “As a result, auto was knocked from its perch as the largest ad sector for the first time in a long time, if not ever,” the analyst said. “2009 is likely to be an even worse year for auto advertising” after a 29 percent decline in the first quarter.

But for 2010, Nathanson is more bullish, though he estimated that GM’s rationalization from eight to four auto brands could in the worst case reduce auto advertising by $1.3 billion, or 9 percent, next year.

“The dealership closures by the Detroit automakers (totaling 17 percent of the nationwide footprint) sounds disastrous for local advertising, but we believe the 2010 impact will be less severe than many fear,” he said, pointing to small local dealer ad budgets and the fact that the shuttered dealers are the weakest in the network anyway.

Overall, “local TV stations will be a big beneficiary of increased auto spending amid a pickup in local dollars in 2010,” he concluded. “The potential step-up in local ad spending, coupled with improved local political advertising dollars, drives an increase in our TV station forecasts.”

In another car-focused report Wednesday, UBS analyst Michael Morris argued that dealership closures will have less impact on major media companies.

GM and Chrysler have stated on several occasions that their closures will focus on smaller, underperforming dealerships, which advertise the least, he said in echoing one of Nathanson’s themes.

The part of the media sector that will suffer most will be the newspaper industry — as smaller dealerships relied more heavily on it for advertising — and TV stations in smaller markets, according to Morris.

He also mentioned Disney and CBS as attractive investments given their strong brands and healthy secular growth profiles.


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