Edward Jones’s Diedrich Recommends Scripps, Disney: Tom Keene
Investors should buy shares of Scripps Networks Interactive Inc. (SNI) as the cable TV company benefits from demand in advertising and higher fees from distributors, according to Robin Diedrich of Edward Jones & Co.
“This company has been doing extremely well,” the St. Louis-based media analyst told Tom Keene and Ken Prewitt in a “Bloomberg Surveillance” interview today. “The ratings have been very strong. So because of that, even though they are smaller, they have good bargaining power.”
Scripps owns non-fiction networks such as Travel Channel, DIY Network, HGTV, Food Network and Cooking Channel, which are “highly coveted channels for advertisers,” she said. Diedrich has had a buy rating on the stock since 2008.
The Cincinnati-based company rose 38 percent this year through yesterday, more than the 28 percent gain for a gauge of media stocks in the Standard & Poor’s 500 Index. Walt Disney Co. (DIS), the world’s largest entertainment company, has added 32 percent in 2012.
Disney is at an advantage to other media companies because of its ownership of ESPN, benefitting from the sports cable channels’ subscriber fees and advertising income at the same time, said Diedrich.
“A lot of the networks don’t make a lot of money per se on sports, but ESPN is one that does because of the model they have,” she said. “It’s extremely important, today more than ever, to have sports in your line-up if you’re a media company.”
Profit at Disney’s TV networks rose 1.5 percent to $2.13 billion in the third quarter, while revenue gained 2.7 percent to $5.08 billion. The ESPN cable network realized $139 million less in deferred fee income in the quarter, compared with a year earlier.
CBS Corp. (CBS), owner of the most-watched television network, is attractive because of its management team and ability to get paid for content, Diedrich said.
“It’s still a highly valuable property,” said the analyst, who has had a hold rating on CBS since 2005. “They don’t give their programming away, they’re very careful about the deals that they’re doing.”
CBS, controlled by 89-year-old Chairman Sumner Redstone, gets more revenue from advertising than other major U.S. media companies. To decrease its dependence on the U.S. ad market, CBS has pursued international expansion and deals with online distributors such as Netflix Inc., Amazon.com Inc. and Hulu LLC’s service in Japan. The stock has rallied 34 percent since December.
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