Slow Advance TV Ad Sales Depress Univision Shares

Shares of Univision Communications Inc. tumbled 16% Wednesday after the largest U.S. Spanish-language television network reported lower-than-expected advance ad sales for the new fall TV season.

The Los Angeles-based company’s report also dragged down other Latin-oriented broadcasters--even though many analysts say the industry’s growth prospects overall remain strong.

Univision shares (ticker symbol: UVN) slid $19.69 to $100 in heavy trading on the New York Stock Exchange, though they closed well above their intraday low of $86.

Just last week the stock hit an all-time high of $125.38.

Univision said “upfront” ad sales rose 18% to $501 million for fall, less than the 20% to 25% growth expected, analysts said.

The shortfall comes amid concern that a slower U.S. economy in the second half of this year could cut ad sales growth broadcast companies.

“Univision has a heck of a lot of exposure, and it’s a very expensive stock,” said Angela Auchey, analyst at Federated Investors. “It’s not like 18% is a bad number, but it doesn’t take bad numbers for stocks to decline, it takes decelerating growth.”

Analysts said Univision and the Spanish-language broadcast market in general still have strong long-term growth prospects. Univision’s growth is still well ahead of the annual revenue growth rates of 2% to 8% predicted for conventional broadcasters in the coming year.

“The stock was priced to perfection, but with a slowdown had gotten ahead of itself,” said Frank Bodenchak of Morgan Stanley Dean Witter.

Analysts expect Univision to earn about $1 a share this year, which means the stock still has a price-to-earnings multiple of 100--even after Wednesday’s slide.

TV networks typically sell the bulk of their advertising time several months before the start of the new fall season. Univision, though, decided to sell less of its inventory than expected in this year’s upfront market, analysts said.

Instead, Univision is betting that it will be able to get higher prices once the season officially starts in September by selling in what is known as the “spot” market.

Univision also said sales to telecom firms, its No. 1 ad category, declined in the upfront market because of a “shift in certain segments of their business.”

The news sent two other Latino-focused broadcasters tumbling. Entravision Communications (EVC) dived $2.31 to close at $17.19, while radio broadcaster Hispanic Broadcasting (HSP) slid $2.56 to close at $27.38, both on the NYSE.

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Slower Growth?

Shares of Spanish-language TV broadcaster Univision Communications (ticker symbol: UVN) plunged after the company warned of weaker-than-expected advance ad sales.

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Univision shares, monthly closes and latest on NYSE: *

Wednesday: $100.00, down $19.69

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Source: Bloomberg News