Nomura Downgrades Entertainment Industry to 'Neutral'

NY - Analyst Michael Nathanson of Nomura Investments downgraded his take on the U.S. media and entertainment sector from "bullish" to "neutral" on Monday saying "we feel the sector's positive earnings revisions are going to slow in 2012." Younger crowd downgraded his rating on CBS Corp.'s stock from "buy" to "neutral," quarrelling that 2013 earnings "are going to decelerate dramatically publish long awaited strong 2012 results." But regardless of the downgrades, Nathanson stressed: "Getting defended media basic principles in the last year, our downgrade from the group and CBS isn't rooted in the fact that industry motorists are going to disappear a high cliff. Rather, we believe the upside earnings surprises that drove CBS and also the larger sector will be not as likely around ahead." Nathanson still suggests shares of Wally Disney, News Corp, and Viacom as "buys" within the entertainment sector. "We feel that Disney and News Corp. possess the best earnings per share revision potential within the group because of the advantage of near-term and common affiliate and retrans/reverse discussions, strong cable content franchises, and the opportunity of further capital return plans," he authored. "Viacom has become just a value experience an enormous equity shrink." Among factors adversely affecting his entertainment industry outlook are U.S. advertising trends, that the analyst stated "happen to be decelerating over 2011 and arrived below forecast for that second quarter consecutively.Inch He stated he was "worried that national scatter trends, a significant supply of upside, have cooled and can become much more challenging within the first quarter." Nathanson also stated some cable systems groups with rankings challenges will face elevated programming and marketing costs, and more compact cable systems proprietors may have more contentious associations with marketers. Plus, while large entertainment companies have "broadly accepted" stock buybacks, which boost earnings per share and investor confidence, traders are actually mostly including them within their evaluation of stocks. "After decades of capital destruction, we applaud these [buyback] actions," stated Nathanson. "However, they are considered directly into most forward earnings estimations." Nathanson even pointed out digital platforms, for example Netflix and Amazon . com, highlighting that for that second quarter consecutively they've driven earnings upside surprises at Hollywood conglomerates. "When we're at the begining of days, we worry the marketplace is beginning to determine these deals 'as getting your cake and eating it, too'," he authored. "We're concerned the scope for additional near-term digital dollars is restricted, the rise in Web options may cannibalize some degree of viewing which traditional syndicated TV purchasers is going to be less thinking about library content moving forward.Inch Email: Georg.Szalai@thr.com Twitter: @georgszalai Related Subjects Time Warner Viacom The Wally Disney Company News Corp. CBS Corporation