CBS and Fox networks have the best multiyear investor outlook, Wall Street research firm MoffettNathanson said in a report for investors today.
The report, titled “U.S. Media: Why Is This Quarter Different From Others?,” noted that the viewership trends for media companies in the first quarter of 2017 will historically be seen as some of the weakest numbers ever. But the media sector was still “a strong out-performer in the first 100 days of the year,” and MoffettNathanson’s research team raised its EPS estimates for Viacom, 21st Century Fox and Time Warner.
“Despite this overwhelmingly negative quarterly data point, sentiment here, as measured by stock performance, remains positive driven by a combination of external factors like tax reform, regulatory change, potential M&A and the continuing roll-out of virtual MVPDs,” the report stated.
MoffettNathanson’s EPS estimates for CBS, AMC Networks and Netflix remained as is, and were lowered for Disney, Scripps Networks and Discovery.
The firm’s research indicates that CBS and Fox will likely grow EPS by double digits in the coming years, partly due to the companies’ varied but well-placed assets, such as essential news and sports coverage.
“Those networks are often the same programmers who find themselves as anchor tenants on every virtual MVPD offering,” the report stated.
CBS and Fox, along with ABC, NBC and regional sports networks, were tapped to feature live content on YouTube TV, which went live last week. The inclusion of those networks indicates a comprehensive strategy by the programmers aiming to maintain an edge in a fast-shifting media landscape.
“Is [YouTube TV] going to change the world? No. It reflects that the world has already changed,” Forrester analyst James McQuivey wrote in March. “TV networks and cable programmers are embracing digital distribution, albeit carefully and after taking some beatings. OTT TV will be commonplace soon and broadband providers are gearing up by shifting to digital home and other value-added services. Most of all, digital platforms—Amazon, Apple, Google, and Facebook—are indeed taking over the world, this time with permission from their former adversaries.”
For advertisers, MoffettNathanson’s report expects cable to outpace broadcast advertising in the quarter—cable advertising predictions are flat while broadcast is down three percentage points. Scripps Networks, up six percentage points, is expected to show the strongest growth.