The firm also sees impact for other networks such as Twenty-First Century Fox Inc FOXA and Walt Disney Co DIS.
EPS Risk Modest, Though Sentiment To Be Hit
However, the firm believes earnings per share risk to NFL advertising is modest, although it sees sentiment turning incrementally negative if PT games continue to post double-digit rating declines. Jefferies estimates that about 19 percent of the fourth-quarter network TV advertising is accounted for by NFL accounts.
Rating Weakness
Noting that Week 3 of the NFL season is now in the rear-view mirror, analyst John Janedis pointed out that all three weekends (from Thursday through Monday) saw year-over-year declines, with Week 1 seeing 10 percent drop; Week 2, 12 percent; and Week 3, 11 percent.
Delving on the probable cause of the weakness, Jefferies surmises that it could be due to the NFL programming being available on more platforms, less interest from younger demos and a more negative view on the NFL per se.
The Numbers
The firm estimates that 225 of the 276 NFL programming hours fall in the fourth quarter. The corresponding dollars for the total network advertising, according to the firm, is 19 percent of the total network advertising in the quarter.
Weakness More Broad Based
Jefferies noted that ratings for MLB and the U.S. Open Tennis have also been mixed. However, the loud noise surrounding the weakness for NFL is due to the ratings associated with the games.
Breaking Ad-Minutes
The firm noted that a look at all five NFL packages last week showed 52 minutes of advertising per game — of which, eight minutes is for promotional advertising for the NFL and the network and the remaining monetizable through national and local ads, with auto ads occupying one-third of the ad spots.
Networks Affected At Varying Degrees
Jefferies' estimates pitch ad revenues from the NFL at $2.6 billion throughout the season, which is about 12 percent of ad dollars for the second half. NBC gets $800 million in ad dollars from NFL compared to Comcast's $615 million. However, CBS has the greatest exposure in terms of earnings per share, with 1.9 percent of its 2016 earnings per share and 5.7 percent of its fourth quarter earnings per share.
Summary of Jefferies' Ratings
- CBS: Buy.
- Comcast: Buy.
- Disney: Hold.
- Fox: Buy.
At Time Of Writing ...
- CBS: up 1.26 percent at $54.83.
- Comcast: down 0.16 percent at $66.57.
- Disney: up 0.38 percent at $92.55.
- Fox: down 0.1 percent at $24.28.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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