Belo Corp (BLC), CBS Corporation (CBS): Why Television Station Owners Have Positive Momentum

With the acquisition of Belo Corp (NYSE:BLC), Gannett would be gaining 20 stations, including NBC, ABC, and CBS Corporation (NYSE:CBS) affiliates in roughly equal numbers. Belo Corp (NYSE:BLC) brings with it wide operating margins, and solid cash flows. Gannett would henceforth own 43 broadcast TV stations. Belo Corp (NYSE:BLC)’s existing stations consist of several in larger markets, such as Dallas, Houston, and Phoenix, but it, too, is significantly reliant on local ad demand. In the March quarter, its earnings per share increased to $0.16, up from $0.14 in the prior year, on slightly higher overall revenues. Belo Corp (NYSE:BLC) shares are trading on the pending deal to be bought out and without such an agreement would be primarily an income investment (see my earlier blog on the Gannett / Belo deal).

How CBS Corporation (NYSE:CBS) is Winning

CBS, as one of the few companies with a primary focus on creating new programming for traditional broadcast TV, is a consistent leader on the ratings charts, thanks to shows such as NCIS and CSI. Its was recently reported that CBS’ upfront ad sales rose more than 8% year over year, a sign of stable spending trends (see my prior blog on this subject).

The company additionally broadcasts premium cable networks, Showtime and the CBS Sports Network, properties that are supporting profit advances. Plus, it is building its foothold in the digital / online broadcasting market through deals with the likes of Amazon and Netflix, helping to maintain its visibility and audience share.

On that note, CBS will face even greater competition from cable and online media sources. Still, it, for one, ought to invest in growth operations, and thus prolong its profit growth trend as long as conditions are conducive. Given healthy ad spending, CBS shares are a good way to gain exposure to the broadcast television market, while also benefiting from the ownership of a major entertainment conglomerate. The stock is trading at a P/E of 14.6x forward earnings. The company may well earn about $3.04 a share in 2013.

Damon Churchwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Damon is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Why Television Station Owners Have Positive Momentum originally appeared on Fool.com is written by Damon Churchwell.

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