UBS analyst Michael Morris is lifting his outlook for the media sector ahead of upcoming third quarter earnings reports. The media analyst believes that ad sales trends are likely to return to normal.
In a report out Oct. 8, Morris points out that sales are down just 6% at the top 100 marketers while those same companies reduced ad spending by 13% over a two-year period, between 2007 and 2009. "The consensus ad outlook calls for a prolonged change in that trend. We expect a return to the pre-cycle relationship."
Morris is expecting a rise in media sector stock prices based on improving comparisons with last year. TV advertising fell 3.6% in the third quarter last year, and by 7% in the fourth quarter. First quarter saw the biggest drop off, at 9.5%, while the decline moderated in the second quarter, down 6.9%.
Morris also sees significant upside for CBS, Disney, Time Warner and Viacom.
Big media companies report third quarter earnings calls in November. Discovery Communications and Viacom report Nov. 3; Time Warner and Comcast Corp. report on Nov. 4, followed by CBS Corp. on Nov. 5. Disney unveils third quarter earnings on Nov. 12.