Shares Improve While Trends Worsen For WMG
Warner Music Group Corp. (NYSE: WMG) has witnessed industry trends worsening, according to Goldman Sachs, but has still experienced share improvement throughout 2010.
In its research report, Goldman Sachs writes "We raise our 4QFY10 revenue estimate by 7% to reflect market share gains and FX appreciation in the quarter, offset somewhat by a worsening of industry trends. WMG's US album market share increased by 130 bp yoy to 22.1%, its highest share in two years. We model 4QFY10 revenue, EBITDA, and EPS of $720 mn (-16% yoy), $104 mn (-22% yoy) and ($0.11) vs. consensus at $730 mn, $100 mn, and ($0.13). US album sales worsened from -11% yoy in 3Q to -15% yoy in 4Q. Physical album declines also accelerated from -22% yoy to -27% yoy, due mainly to tough comparisons in the year-ago period when Michael Jackson's death prompted a surge in purchasing. Digital unit growth slowed from 5% yoy to 2% yoy. Higher sales & marketing and taxes result in lower EPS; we model FY2010-FY2012 EPS estimates of ($0.77)/($0.76)/($0.65) versus ($0.76)/($0.71)/($0.57), prior."
Goldman Sachs maintains its Neutral rating and $5 price target.
Warner Music Group closed Friday at $5.11.
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