Analyst Report on the Mass Media Industry
The mass media industry is a collection of companies that produce and supply television, radio and printed media to a large audience of customers. In this report, I will analyze a diverse collection of mass media firms composed of The Walt Disney Corporation (DIS), Viacom Inc. (VIAB), Time Warner Corporation (TWX) and Regal Entertainment Group (RGC). The mass media industry is growing immensely and the average annual growth rate for the worldwide broadcasting and cable TV is showing a growth of 27% annually, and an industry wide 5.6% annual growth rate over the next five years . However, due to a global shift towards digital media, the mass media ...view middle of the document...
86 per share, which adds to its 32-year dividend-paying streak . Disney currently has an operating margin of 20.98%, which allows for Disney to give more of its returns back to the shareholders. Disney has the lowest leverage ratio in the industry of 1.83 and its return on equity is at 14.41% . The current price of DIS is $71.05 and we predict the stock price to reach $85.00 by the end of 2014.
Regal Entertainment Group (RGC) is a mass media company that operates as a motion picture theatre in the United States. Regal’s 1Q14 report shows earnings that are well below the industry’s average and I report that investors should sell the RGC stock. RGC has the lowest operating margin in the industry’s sample companies producing an 11.46% operating margin. Along with the lowest operating margin, RGC shows a leverage ratio of -3.11 where its equity was shown as negative in its reports. Along with its unusual negative leverage ratio, RGC has a return on equity of -21.50%, also the lowest among the industry’s sample group .
In good news, Regal’s premium format ticket sales have increased significantly, “comprising 19.9% of admissions revenues versus 13.5% in the year-ago period” (Goss, p.2). Currently RGC pays a $0.84 quarterly dividend (4.5% yield). Forth quarter revenues of RGC were $45.8M below estimates and only 2.3% above fourth quarter reports in 2012 . Along with revenues falling short of estimates, RGC reported an adjusted EBITDA of $125.8M, which is 17% lower than a year ago . Among the disappointing financials, earnings per share were reported at $0.17, which is below our estimate of $0.24 . After Regal Entertainment Group’s disappointing report, I believe that RGC will underperform the industry average throughout 2014, and faces many challenges ahead with the upcoming digital media era.
Time Warner Inc. (TWX) media conglomerate is currently in a merger process with Comcast; a merger that is currently under final review by the US anti-trust regulators. TWX 4Q13 report shows average earnings, and we recommend to HOLD TWX shares. TWX reported 4Q13 revenues of $8.6B, which is up 5% y/y . TWX raised their dividend by 10% to $1.27 annual dividend per share and has also authorized $5B of share repurchases in 2014 .
With the partnership of TWX and Comcast, TWX will exchange its stockholders shares for 2.875 shares of CMCSA and also be tax free to Time Warner Cable shareholders . Current EPS of TWX is $3.51 and we expect that an EPS growth in 2014 $3.90, which is an 11% increase on the year. Time Warner Inc. has an operating margin of 22.99% and a leverage ratio of 2.28. However, this ratio should shrink after the company $5B repurchase of stock. TWX return on equity is at an average for the industry at 12.37%. Concluding the report of financials, TWX would be a stock that would be though of to be a buy, however, due to the merger with Comcast and the current...