Summary Business:

Spanish-language media company


Los Angeles


A. Jerrold Perenchio

Market Cap:

$8.8 billion Dividend Yield: N/A*

Total Liabilities:

$747.0 million P/E Ratio: 88.08

Long-Term Debt:

$298.3 million

* Univision Communications does not pay dividends.

Even as other U.S. media companies falter in the slowing advertising market, Univision Communications Inc. is hitting its stride, aided by its pending diversification into the music business.

The results will likely be stronger earnings and a higher share price, according to several industry analysts.

Los Angeles-based Univision, the nation's largest Spanish-language television broadcaster, has experienced dramatic stock price volatility ever since last summer, shortly before instituting a 2-for-1 stock split. After hitting a split-adjusted high of nearly $63 a share two weeks before the split, Univision shares collapsed over the ensuing weeks, bottoming out at $24 a share in mid-October.

David Miller, an analyst with Sutro & Co., attributed the decline to lower-than-expected advertising sales for the fall TV season, the possibility of increased competition in the Hispanic TV market and several negative analyst reports.

Since then, however, Univision has regained much of that value, with its shares trading at about $43 apiece last week, and analysts now have a 12-month target price of $55 on the stock.

Some of that bullishness is related to the company's recent announcement that it is forming a music division, established in part through a deal to purchase a 50 percent stake in Mexico's Disa Records. Univision has not disclosed the terms of that pending purchase, which is expected to close this quarter. Universal Music Group, a division of Vivendi-Universal, has already agreed to handle the distribution, giving the new label a global reach.

"Univision's entry into Spanish-language music is a natural extension of our business and clearly positions the company as a broad-based, multifaceted entertainment company," A. Jerrold Perenchio, chairman and CEO, said in a written statement.

The company's network TV operations already reach more than 92 percent of all Hispanic households, with an 85 percent average share of the U.S. Spanish-language network television audience. Univision also owns Galavision, a Spanish-language cable network with more than 2.7 million Hispanic subscribers.

For Miller, the stake in Disa represents another base of content that Univision can leverage to the hilt on its online, cable and broadcast properties.

"The interest in Disa should allow Univision to cherry-pick selected artists who have the necessary cross-over appeal to sell themselves to a U.S.-based audience, while shoveling the distribution responsibility to Universal, which through its merger with French-based Vivendi, maintains a global reach," Miller said.

Miller estimates that Univision paid about $50 million for its stake in Disa, the second-largest independent Spanish-language record label in the world behind Grupo Televisa SA's Fonovisa music operation. Miller is maintaining his 2001 earnings estimate at 55 cents per share, after having downgraded his estimate in March from 57 cents a share. He currently rates the stock a "buy."

Univision reported net income of $35 million (17 cents per diluted share) for the fourth quarter ended Dec. 31, up from $31.3 million (15 cents a share) in the like-year earlier quarter.

Fourth-quarter revenues were $238.9 million, vs. $205.3 million in year-earlier quarter.

Univision attributed its fourth-quarter earnings growth to higher advertising spot prices and lower community affairs and acquisition costs.

The company's financial results for the first quarter ended March 30 are expected to be released May 1. The consensus of analysts surveyed by First Call/Thomson Financial is for Univision to earn 6 cents a share in the first quarter, compared with 9 cents for the same period last year.

"We reduced our first- and second-quarter sales projections for Univision to reflect weakening industry-wide demand for television network and station advertising," said Jessica Reif-Cohen, an analyst with Merrill Lynch, in a research report. "Univision's sales gains are projected to far outperform English-language broadcasters; however, the Spanish-language marketplace is not wholly insulated from weakness in the domestic automotive and budget retail advertising categories."

Besides its stake in Disa, the company is in the process of integrating the 13 television stations it purchased in December from Barry Diller's USA Networks for $1.1 billion in cash.

For reprint and licensing requests for this article, CLICK HERE.