Univision Means Success in Any Language

Two and a half years after its initial public offering, Los Angeles-based Univision Communications Inc., the nation’s largest Spanish-language broadcaster, has suddenly drawn the attention of Wall Street in a big way.

In the last five weeks, the company’s stock has shot up more than 40%, and last week Univision was added to Standard & Poor’s mid-cap 400 index--a move that required investors to buy a total of 2.6 million shares to replicate the new composition of the index.

What’s driving this growth, analysts say, is a recognition of the consumer power of the U.S. Latino population, the nation’s fastest-growing minority group. In 1998, Latino buying power was estimated at $370 billion, greater than that of many emerging nations in the Pacific Rim and Latin America. By 2010, that figure is expected to more than double, to $940 billion.

In a research note issued last month, J.P. Morgan analyst Matthew Harrigan called Univision “the U.S. terrestrial television growth stock”--a statement that looked prophetic when Univision’s share price surpassed J.P. Morgan’s target for next year in less than three weeks, closing Monday at $59.13, up $1.25 on the New York Stock Exchange.

“Top consumer-products companies now view Hispanic purchasing power as integral to their business strategies,” Harrigan said Monday. “There are very few stocks that provide a pure play on the Latino consumer. Really, this is the Latino consumer growth stock of choice.”

At a time when most networks are suffering audience declines, Univision, the nation’s fifth-largest broadcast network, has seen its audience grow 25% since last season, to a record 4 million daily viewers. By comparison, the most-watched U.S. network is NBC, which claims an audience of 14.8 million.

But Univision’s penetration of Latino households is unrivaled. The network draws more than 90% of all Spanish-language TV viewers and, according to Nielsen Media Research, the top 25 programs in Latino households each week are on Univision. Telemundo, the nation’s only other Spanish-language television network, draws about 8% of the Spanish-language audience--down precipitously from 43% in 1992.

That domination has allowed Univision to increase its ad rates and draw additional advertisers, luring 21 new clients onto its roster this season. The number of new advertisers flocking to the network is expected to increase during next month’s “upfront” sales season, when more than 85% of TV’s prime-time advertising spots are sold for the fall season.

“Univision is so dominant,” one national ad buyer said, “we have no choice.”

The network was bleeding red ink when media entrepreneur A. Jerrold Perenchio, Mexican broadcast giant Televisa and Venevision, Venezuela’s leading network, purchased it from Hallmark for $500 million in December 1992.

The two Latin American networks not only pumped capital into Univision but provided it with nearly two-thirds of its programming while blocking chief competitor Telemundo from access to the world’s two leading sources of Spanish-language entertainment.

Once the company was back on steady financial ground, it began to increase its domestically produced programs, adding the morning news-and-variety show “Despierta America” (“Wake Up, America”) and the entertainment gossip show “El Gordo y la Flaca” (“Big and Skinny”). But while nearly half of Univision’s content now originates in the U.S., its top-ranked shows are still telenovelas, or soap operas imported from Mexico.

Since the company--which has about 2,000 employees, most based in Miami--went public in October 1996, it has registered nine consecutive quarters of sales growth. Net revenue was $159.4 million in the final quarter of 1998, for example, a 16% increase over the same period a year ago.

And bigger profits are expected when the company releases its results for the first quarter of 1999 next week.

“The first quarter is going to be very strong,” Harrigan said. “On the basis of the fundamental business, it’s a tremendous business. You’re looking at 20% [annual] cash-flow growth possibility over five years just on the basis of the business they already own today. There isn’t a U.S. media company that has this fast an in-store growth rate.

“You have to have the execution as well as the market opportunity. This company has both.”

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Latin Leverage

The stock of Univision Communications Inc., which runs the nation’s largest Spanish-language television network, has risen more than 40% since early March. Analysts credit the gain to the company’s unrivaled access to the burgeoning Latino market in the United States.

Weekly closes and latest:

Monday: $59.13

Source: Bridge