Clear Channel has moved about 3% over one month, and there have been some high volume days recently to support the upward movement. The earnings could not do much for the stock despite the fact that the company posted a net profit after two quarters of losses. The crash in June had dented the sentiments, but stock is still up by 45% on a 52 week basis. Fundamentally, the revenue on ttm basis is $2.95 billion, and the gross profit is $1.34 billion. The company is carrying a net loss of around $200 million on a ttm basis, but that is mainly because of the $248 million impairment hit in the fourth quarter of 2012 on account of extinguishment of debt. The debt on books and declining cash position is a bit of a worry. So the fundamentals are not that robust, and one good quarter cannot be expected to change the sentiments. It needs a few more quarters of good growth in top and bottom-line so that investors see some consistency in the performance. Going by the ttm figures, the topline is not expected to show too much growth, though the bottom-line may show some improvement. Growth is not easy due to the competition in the industry which keeps the margins under pressure. The outdoor advertising giants like Lamar (LAMR) and CBS (CBS) provide direct competition. The industry also faces competition from other segments like online advertising. Social media is increasingly being used by advertisers to spread awareness about their products & services. Celebrity influence is being used to encourage people to use the product / services. IZEA (IZEA), a company active in the social media sponsorship space, recently reported results of a survey which point to increasing popularity of native advertising. Meanwhile, insidermonkey reported the hedge fund activity related to Clear Channel which indicated some bullishness in the stance of the smart money. That is a bit encouraging.
Clear channel has remained quiet over the last few weeks. The earnings were better than expected, but that did not move the needle much. Perhaps, the stock has already appreciated a lot over the last 52 weeks, which makes further rise a bit difficult. The stock has appreciated more than 45% over the last one year. The good part is that the company posted a net profit in Q2'13 after a few quarters of losses, and even the revenue increased slightly. Though the company is having a net loss of $199.66 million on a ttm basis, most of that loss can be attributed to the impairment in Q4'12 due to extinguishment of debt. The gross profit is $1.34 billion and the revenue is $2.95 billion (ttm). The operating profit margin is in excess of 10%. However, over the years the performance has not been that good because the top and the bottom-line has not shown consistent growth. Q2'13 is a good start, but it will need more than a few good quarters to change the mood. Importantly, like many peers in the industry, the debt is high. The debt has increased recently, and the cash on books has gone down in the recent quarters. The topline growth is not easy in view of the high level of competition in the industry. The outdoor advertising segment has Lamar (LAMR) and CBS (CBS) and other players, and the segment itself gets strong competition from other forms of advertising. Online advertising is a fast growing and dynamic field. Sponsored content on the internet / social media or native advertising is being preferred by many advertisers. A company in this segment, IZEA (IZEA) recently posted record Q2 numbers. The competition also puts pressure on the margins due to higher costs. Clear Channel needs to work hard to deliver good numbers consistently so that the uptrend can be sustained.
The earnings for the second quarter were better than expectations. The analyst estimates were exceeded, and there was improvement in the top and the bottomline. In fact, the company reported a profit of $8.9 million compared to a net loss of $8.12 million on a yoy basis. This translates into an EPS of 2 cents per share compared to a net loss of 2 cents per share in Q2'12. The revenues were $766 million, up 1% compared to $761 million in Q2'12. The stock has been trading in a tight range over the last few months, and the current earnings are likely to help improve the sentiments slightly. Over the past one year, the stock has appreciated by nearly 50%. The company had reported a huge net loss in Q4'12 due to impairments and extinguishment of debt. Even in Q1'13, the performance was not good because the revenues remained flat, and the net loss increased on a yoy basis. The key to future growth in the stock is continuous improvement in the bottom line. The top line growth is also likely to be difficult in the face of increasing competition. There are major players like Lamar (LAMR) and CBS (CBS) in the outdoor advertising business, but other segments of the advertising market, like online advertising are also providing strong competition. Social media is increasingly being used by advertisers to reach out to the customers. Native advertising / Social media sponsorship is also gaining in popularity. IZEA (IZEA) is using the power of celebrity influence to help advertisers attract customers. For Clear Channel, high debt also remains a major concern. The debt of $4.94 billion puts pressure on the margins due to interest payouts. The cash on books is around $399 million. If it can reduce leverage and continue to improve the bottom-line, the outlook for the stock will improve further.
The last one year has been relatively better for Clear Channel. Despite a 15% correction from the high of $8.75, it is up 48% on a 52 week basis. 2012 was bad due to the crash in March, but the stock has managed to recover a bit over the next few quarters. The fundamentals were showing signs of improvement, as the revenues and net income had shown good growth till Q3'12. In Q4'12, the revenues increased, but the company reported a huge net loss due to impairments and extinguishment of debt. In Q1'13, the revenues declined sharply on a sequential basis, and were flat on a yoy basis. The net loss was also substantial. The stock price has moved accordingly, and the recent correction is a reflection of the performance in the first quarter. As mentioned in the company's 2012 annual report, outdoor advertising represented only 3% of the total dollars spent on advertising in the United States in 2011. While the company continues to promote outdoor advertising as a medium for reaching out to customers, the industry is likely to face competition from new concepts from time to time. The fragmented industry faces challenges from different forms of advertising including Internet. Online advertising is becoming popular for its impact, and social media is a favored channel. Social media sponsorship companies like IZEA (IZEA) are using the power of celebrity influence to help advertisers attract customers. Clear Channel faces competition from players like Lamar (LAMR), CBS (CBS) and the likes. Growth in revenues is not going to be easy, but the strong presence of the company in the market cannot be underestimated. Cost control is also another major area that needs to be focused. If it can grow at a decent pace and improve margins, the outlook can improve. Slippages can lead to dampening of the sentiments.