Election winners: 9 broadcasting plays

by George Putnam, editor The Turnaround Letter

One industry group that is sure to get a boost from the election cycle is broadcasting. One analyst has predicted that $4.9 billion will be spent on political advertising for the 2012 elections.  

The bulk of this ad spending will go to television, but radio and other media will get their share as well. Below, we’ve highlighted nine broadcasting stocks that look interesting to us right now.

TV and radio broadcasters have struggled in recent years as new forms of competition have developed.  

However, the broadcasters are showing signs of regaining their footing, and the elections may be just what they need to get back on track. A number of TV broadcasters will get a further boost this year from the Summer Olympics in London.  

Belo (BLC) began as a newspaper company in Texas, but it has transformed into a broadcasting company through the spinoff of its newspaper assets.  

Texas is still a key market, but it also has a strong presence in the Northwest, Mid-Atlantic and Arizona.  Belo has affiliations with all major networks, and it ranks first or second in nearly all of its markets.  

Net debt has been steadily declining in recent years, and the stock is attractively valued with a nearly 5% dividend kicker.

Comcast (CMCSA) is the nation’s largest cable operator.  With the $30 billion acquisition of a controlling 51% interest in NBC Universal, it became a significant player in broadcast TV, content production and theme parks as well.  

The cable business is stable and a strong competitor, but the NBC Universal side is an acknowledged turnaround in progress. Political ads and NBC’s Olympic broadcast rights should provide a good boost in 2012.  

Cumulus Media (CMLS) is the largest pure-play radio broadcaster in the United States.  Revenues trended down from 2007 through 2009, accompanied by losses.  

But operations began a turnaround in 2010 that largely continues today. The stock rebounded off its bear-market lows of 2009, but continues to trade at compressed valuation levels.

Disney (DIS) is a global entertainment company.  Media operations, including the ABC network, account for 46% of revenues.  

While the impact of election year advertising may be overshadowed by other parts of the company such as ESPN, Disney Channel and theme parks, it certainly won’t hurt.  

Disney controls some of the strongest brands on the planet, and the stock is not trading much above the level it first hit in 2000.

Entercom Communications (ETM) has radio operations that date back to 1968.  Today, the company ranks as one of the nation’s five largest broadcasters, with more than 100 stations in 23 markets.  

Despite revenue challenges, operations have been consistently profitable with solid free cash flow.  Trading at only 6 times forward earnings and below book value, Entercom could be an interesting holding as 2012 unfolds.

Fisher Communications (FSCI) operates 20 television stations and three radio stations in the Western U.S.  Fisher began broadcasting operations in 1910, and so it has managed many challenging periods.  

Unlike many broadcasters, Fisher has a rock solid balance sheet, with little debt and cash equal to 61% of the current share price.

Lin TV (TVL) operates 32 network-affiliated television stations in 15 markets.  Lin operates 17 stations in states that are expected to be closely contested, including Ohio, Michigan, Virginia and Florida. 

Last December, Lin’s CEO commented that political advertising had become the company’s largest growth area.

News Corp. (NWS) is a diversified global media company with operations in six industry segments spread over five continents. Fox film studios, The Wall Street Journal, and Fox broadcasting account for the bulk of its U.S. operations. 

The recession led to four quarters of declining revenues, but recent results indicate a turnaround is underway. Management may be distracted by legal proceedings in the U.K., but many analysts think the stock would benefit if the Murdoch family were forced to relinquish control.

Sinclair Broadcast Group (SBGI) owns or provides sales services to 73 television stations in 45 markets, thus making it the nation’s largest television broadcasting company. 

The company benefited significantly from political ads in the mid-term elections of 2010, and we expect it to do even better this year. The shares are attractively valued and accompanied by a nice 4.6% dividend.

Learn more about this financial newsletter at George Putnam's The Turnaround Letter.

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