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Apple, Comcast, AT&T: Key Factors That Will Drive Earnings Reports of Media, Communication Companies


Earnings season begins amid a stock market rally and improved recent economic data. The setup could be good news for media and communications companies.

Advertising: TV ad trends look pretty solid since the end of the Summer Olympics. Reported numbers are going to show slower growth rates than the first half of the year but many management teams and observers have noted a nice pickup and firm scatter trends since early September. Local TV stations are starting to see the benefit of politics. Gannett's earnings report, out already this week, revealed better than expected TV station ad growth with no letup in the fourth quarter. One issue emerging for TV is poor ratings to start the season for the big four broadcast networks. Actually, NBC (NYSE:GE) is off to a good start but the declines at ABC (NYSE:DIS), CBS (NYSE:CBS), and Fox (NASDAQ:NWSA) are high. This could impact guidance and certainly will be a primary issue on conference calls.

Internet advertising trends look good for search but mixed for display. This should play well for Google which over-indexes revenue to search and display market share. The display market took a little hit from the Olympics but the larger concern is the transition to mobile. Facebook (NASDAQ:FB) is also getting more aggressive, trying to monetize its larger user base.

Subscribers: The third quarter is seasonally stronger for subscriber-based businesses. Trends in cable should show fewer losses for video subs but losses nonetheless. Cable is set for another quarter of domination in video subs. Domestic satellite TV subs will likely remain pressured. ARPU across TV and broadband looks stable with year to date trends.

In other trends, no negative surprises are in store as the market share is competitive but reasonable. In wireless, the focus will be on margins with the rollout of the iPhone 5 and Samsung's (PINK:SSNLF) Galaxy S3. Wireless service providers instituted some effective changes to upgrade policies that helped margins in the second quarter. The new phone introductions are a good test for how much discipline the companies will sustain. Guidance on fourth quarter margins during the very seasonally strong quarter for smartphone sales will also be instructive.

Box office: Theatrical trends mean little to stock prices as investors understand the high volatility in results and do not generally pay for box office hits and misses. It is widely understood that third quarter box office trends were negative and disappointing. However, October is off to an excellent start and comparisons look easy relative to a disappointing holiday season a week ago.

On a related note, home video has taken a huge hit in recent years and now has a much smaller impact in terms of holding back results for studios. Trends in home video have been improving, however. Maybe it is just easy comparisons but digital sales could be helping. Regardless, a smaller negative is a positive on Wall Street where momentum matters.

This column was previously published by SNL Kagan on
No positions in stocks mentioned.
Entermedia is a long/short equity hedge fund focused on media, communic= ations, and related technologies. Steve Birenberg is co-portfolio manager o= f Entermedia, owns a stake in the Funds' investment management compan= y, and has personal monies invested in the Funds. CBS and Discovery Communi= cations are widely held by Northlake Capital Management, LLC, including in = Steve Birenberg's personal accounts. Steve is sole proprietor of Nort= hlake, a long only registered investment advisor.

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