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Three Station Groups Downgraded

Sep 20, 2004  •  Post A Comment

Bank of America Securities analyst Jonathan Jacoby last week downgraded the stocks of Belo, Hearst-Argyle Television and LIN TV Corp. to a “neutral” rating from a “buy” rating, citing the difficulties that lie ahead for the trio of station groups. Mr. Jacoby also lowered his stock-price targets for Nexstar Broadcasting to $9.50 a share from $11 a share, and for LIN to $23 a share from $24. Central to Mr. Jacoby’s assessment is his belief that Belo, Hearst-Argyle and LIN stocks are fully valued, because any benefit from political advertising spending already has been figured into share prices and because core advertising business is not as robust as Wall Street would have liked. In addition, each station group is facing its own challenges. At Belo, the fallout from the circulation overstatement at its flagship newspaper The Dallas Morning News remains an open question and likely will affect the company’s overall revenue and profitability. With 10.5 percent of Hearst-Argyle’s revenue coming from political advertising in 2004, the company will face a difficult comparison in 2005, Mr. Jacoby said. Meanwhile, Mr. Jacoby said LIN faces risks with its new growth initiatives, including a programming partnership with MTV for a Puerto Rican TV station.

Stewart Asks to Start Prison Term

Martha Stewart abandoned her quest for a new trial last week, saying she would rather start her prison sentence as soon as possible in order to “reclaim my life” and “quickly return to the life I know.” By ending her push for a new trial, Ms. Stewart will learn fairly soon where she will serve a five-month sentence in federal prison. After that, she will serve a five-month stint under house arrest. While she maintained that sufficient grounds exist for a new trial, she said a series of delays would push the appeals process well into 2005. By agreeing to start her jail term now, she said she hopes to be out of federal custody by March. Ms. Stewart was convicted of lying to investigators and obstruction of justice in connection with a sale of ImClone Systems shares in late 2001.

Vivendi Universal Posts Wider Loss

Vivendi Universal last week reported a widened loss of 1.86 billion euros ($2.3 billion) for the first half of 2004, compared with a year-earlier loss of 632 million euros, due to a one-time 2.1 billion-euro ($2.6 billion) noncash foreign exchange translation adjustment related to the sale of 80 percent of Vivendi Universal Entertainment to NBC. Revenue slipped 8 percent to 11.4 billion euros ($14 billion). Executives at the Paris-based conglomerate stressed that the first-half numbers are difficult to compare with previous years because Vivendi Universal has shed more than 16 billion euros’ worth of assets and the company last May sold 80 percent of its Vivendi Universal Entertainment for $14 billion to NBC to create NBC Universal. But the company said it expects the first-half results to mark the last time the company posts a net loss and accordingly raised its forecast for full-year operating profit to approach 2003 levels. In addition, starting in 2005 Vivendi expects to receive annual dividends amounting to $500 million from its 20 percent stake in NBC Universal, which would also boost results. n

-JAY SHERMAN