PREVIEW-Ad rebound plays well for media companies, for now

* Qtly sales seen up at Time Warner, Disney, News Corp

* Advertising recovering, but worries mount over 2011

* Box office generally stronger; DVD sales keep falling

* Time Warner to report on Wednesday

* Media shares up 20-40 pct in past 12 months

By Paul Thomasch

NEW YORK, Nov 1 (BestGrowthStock) – From Walt Disney Co (DIS.N: ) to
Time Warner Inc (TWX.N: ), the media business is looking a little
less glamorous these days.

After an impressive run in big media stocks — most are up
between 20 percent and 40 percent in the past year — concerns
are spreading that an advertising recovery that looked so
promising only a few months ago could stall out.

There’s little doubt advertising has improved. Nearly all
the major media companies, which typically count on advertising
for 30 percent to 70 percent of sales, should show revenue
growth in quarterly results over the coming days.

But the increases are hardly jaw-dropping: News Corp’s
(NWSA.O: ) revenue is expected to rise 3 percent, while Time
Warner, Disney and CBS Corp (CBS.N: ) are expected to post
increases in the neighborhood of 1 percent, according to
Thomson Reuters I/B/E/S.

Those sorts of numbers could make further share gains tough
to justify, analysts said. After all, in the last three months,
News Corp is up 12 percent, Viacom is up 17 percent and CBS is
up 15 percent. Time Warner and Disney have posted more
down-to-earth gains of 4 percent and 7 percent, respectively.

“There has been an ad recovery,” said Morningstar Inc.
analyst Michael Corty. “But generally speaking, the stocks are
fairly valued at this point. Quite a bit of the good news has
been factored into the share prices.”

The wild card is 2011. If the job market improves and
housing shows signs of life, consumer sentiment would likely
perk up, providing a healthy measure of confidence to companies
thinking of new campaigns to market sneakers, peanut butter or

But that’s a long shot, according to most media analysts
and advertising experts. Instead they see an ad market that is
healing slowly.

“If you think of this as a roller-coast ride, we’re on that
long stretch where you hit the little bumps,” said Tim Jones,
Chief Executive of ZenithOptimedia North America, a division of
Publicis Groupe SA (PUBP.PA: ) .

A major media services agency, ZenithOptimedia is
projecting an increase in U.S. ad spending in 2010 of 2.2
percent. It sees 2011 spending up a similarly modest 2.4
percent to $155 billion — a long way from $177 billion spent
before the downturn in 2007.

Jones said it could be several more years before spending
returns to pre-recession levels.


There are positive signs in the ad market, however,
particularly out of critical categories such as autos and
financial services. What is more, television spending appears
to be recovering faster than magazines, newspapers, billboards
or radio.

“When you look at advertising, I’m very bullish on TV and
cable advertising. The notion that everything goes to the
Internet is naive,” said Matthew Harrigan, an analyst with
Wunderlich Securities. “That being said, you can’t get around
the reality. People are still nervous about 2011.”

Beyond advertising, U.S. box office revenues were slightly
better for the media business in the third quarter, rising
about 5 percent from a year ago, according to Michael
Nathanson, an analyst with Nomura Securities.

While Disney, with the strength of “Toy Story 3” will be
one of the winners, News Corp’s studio results could be
vulnerable after so-so performances “The A-Team and “Knight and
Day” over the summer.

Home entertainment will again be a trouble spot for the
media companies, with DVD sales in a long decline. Here, again,
Disney should be the bright spot with strong sales of “Iron Man
2,” making it the exception in a quarter when Nathanson expects
all of the other studios to post lower home video sales.

Overall, according to Thomson Reuters I/B/E/S, Disney is
expected to post earnings of 47 cents a share on revenue of
$9.97 billion; News Corp is expected to earn 24 cents a share
on revenue of $7.42 billion; CBS is looking at earnings of 31
cents a share on revenue of $3.36 billion; Time Warner is
forecast to earn 54 cents a share of $6.41 billion in revenue;
and Viacom is likely to post earnings of 69 cents a share on
revenue of $3.29 billion.
(Additional reporting by Jennifer Saba; Editing by Derek

PREVIEW-Ad rebound plays well for media companies, for now