Entravision Communications Corp., a Spanish-language broadcasting company with 58 television and 49 radio stations across the United States and Mexico, was the L.A. area’s most profitable public company last year. The Santa Monica company, led by Chief Executive Walter Ulloa, earned a 75 percent return on equity over the last three years, the metric by which the Business Journal determines profitability.
As with the previous year’s list of most profitable public companies, real estate led the list with three – Marcus & Millichap Inc., KB Home, and CBRE Group Inc. – of the 10 most profitable. Last year’s leader, Lions Gate Entertainment Corp., landed at No. 9 this year, with a 21.1 percent return on equity over the last three years.
The rise of Entravision, the largest broadcast affiliate of Univision and its subsidiary UniMás, can be seen in part as a reflection of the market it serves. The Hispanic media demographic is one of the fastest growing in the country, according to Jason Bernstein, an analyst at Odeon Capital Group in New York.
Ulloa expects this year’s presidential election to help the company’s bottom line, too, noting that Entravision has media properties in swing states such as Florida.
“All the rhetoric and controversy around Latinos in the U.S. is causing the Latino community to be more energized than usual around this election,” he said.
Longer term, the company has benefitted from its move into digital, which is expected to contribute 15 percent to 20 percent of revenue next year, compared with just 5 percent in 2014, according to Ulloa.
“The digital platform allows us to reach Latinos at all points of acculturation,” whether they’re recent immigrants or second generation, he said. “One of the things that digital gave us is the opportunity to reach the total market.”
Ulloa said the company’s digital revenue increased by 84 percent last year.
The company’s shareholders have other reasons to be optimistic, according to analysts. Entravision also plans to sell off some of its wireless spectrum licenses through an auction to be conducted by the Federal Communications Commission later this year. The company could stand to make $350 million from the sale of its 600-megahurtz spectrum licenses, Bernstein estimated.
Ulloa said he couldn’t discuss the auction due to a confidentiality agreement imposed by the FCC.
“Relative to the other TV broadcasters out there, this is a material event potentially for us and it’s got us very excited,” said Christopher Young, Entravision’s executive vice president and chief financial officer, at a June 3 investor conference in Boston, according to a report authored by Bernstein.
Tracy Young, an analyst at Evercore ISI in New York, said the upcoming auction has given a boost to Entravision’s stock.
“They’re very well-positioned for the spectrum auction,” said Young.
The company, whose television stations generate up to 65 percent of its revenue, owns more than one station in 15 different markets. That means Entravision could sell one station in each and still broadcast both Univision and UniMás content on the other.
Entertainment expansion
Despite slipping a few spots on the list, Lions Gate studio announced on June 30 after months of negotiations that it had agreed to acquire Englewood, Colo., premium cable and satellite TV network Starz, which it said would create the world’s largest independent television business, valued at $4.4 billion. The deal must still be approved by the companies’ shareholders and regulatory agencies.
Lions Gate announced in April that it had struck a deal to distribute its movie library, including its hit “Hunger Games” and “Twilight” series, on video-game platform Steam, which has 125 million users.
Walt Disney Co., the region’s largest public company, with a market capitalization of $159 billion as of June 30, was also among the most profitable over the last three years, booking an ROE of 16.6 percent in the period. The success of Disney’s film units and theme park operations have buoyed its stock despite lingering investor concerns regarding the impact of cord-cutting on the company’s TV operations, particularly sports network ESPN. The entertainment giant moved up three spots on the most-profitable list to No. 18 from 21 last year.
In June, Disney opened its most expensive theme park to date, the $5.5 billion Shanghai Disneyland. Although the park is expected to lose money in its first few years, the studio is betting that the resulting brand exposure in China will pay off in the long run.
Disney also relaunched the “Star Wars” franchise in December, with “The Force Awakens” racking up $2 billion in worldwide ticket sales and becoming the top-grossing movie of all time in the United States. Disney recorded its biggest quarterly earnings ever in the period ended Jan. 2, posting net income of $2.9 billion. It’s Pixar studio release “Finding Dory” has also been the box-office hit of the summer so far with more than $700 million in global ticket sales since its June 17 opening.
Glendale-based DineEquity Inc., owner of restaurant chains IHOP and Applebee’s Neighborhood Bar & Grill, and Calabasas-based Cheesecake Factory continued to serve up solid returns.
DineEquity came in as the No. 6 most profitable firm, with a 24 percent return on equity over the last three years. Applebee’s, which had been based in Kansas City, Mo., moved to DineEquity’s headquarters in September as part of a corporate consolidation.
Cheesecake Factory, which opened a restaurant at the Shanghai Disneyland resort, moved up four spots on the profitable list from last year to No. 12, with 19 percent return on equity. The company has now generated positive sales figures in stores that have been open for more than a year in 25 consecutive quarters.
Striking gold
Global financial market volatility contributed to the success of Santa Monica’s A-Mark Precious Metals Inc., which buys gold and silver from national mints and sells it to wholesalers. The company ranked No. 16 on the most profitable list, with an 18 percent return on equity. The business went public in March 2014.
“When there’s uncertainty in the financial markets, you see people gravitate toward gold and silver as perceived safe havens,” said Ian Corydon, an analyst at B. Riley in Los Angeles. “A lot of investors look at this as a natural hedge to stock investments.”
The turmoil has allowed A-Mark to buy its metal at low prices and sell high, said Corydon.
Missing from this year’s lists of the most profitable and largest public companies are satellite television provider DirecTV Inc., which was acquired by AT&T Inc. in July of last year.
Homebuilder Ryland Group Inc. is also gone thanks to its merger with Standard Pacific Homes in October. The company is now known as CalAtlantic Group Inc. and headquartered in Irvine.
