VIEWS: 400 PAGES: 2 CATEGORY: Market Research POSTED ON: 11/6/2009
This is an company analysis on Clear Channel Communication. The section included are: Summary of company, financial analysis, recent company news, company strengths, threats and risk factor, recommendation to buy/sell, and conclusion.
Company Analysis Summary of the Company Clear Channel Communication, Inc. is a diversified media company, incorporated in Texas in 1974. Its business consists of three operating segments: radio broadcasting, Americans outdoor advertising, and international outdoor advertising. Financial Ratio Analysis Clear Channel Communication Inc. current ratio is rather low, 1.06:1, which illustrates that the company is not that liquid, because for every dollar of current liability, Clear Channel has $1.06 of current assets. Looking at last years current ratio, 1.03:1, it shows their have been slight improvement in the liquidity of the company. Clear Channel has an acid ratio of .753, which is very concerning; because with a number like this, the company cannot pay its current liabilities. The receivables turnover ratio for Clear Channel is sustainable low for both the year of 2005 and 2004. This implies that the company should re-assess its policies in order to ensure the timely collections. As calculated, for Clear Channel it takes approximately 83 days to collect its receivables, which is far too long for a company which required the money quickly to reinvest. The profit margin for 2005 was 14.15%, meaning the company has net income of $0.14 for each dollar of sales. This number is not too larger, but greatly better then Clear Channel last year performance. For last year profit margin was in the negative territory, which concludes that the company has a substantial amount of net loss. The asset turnover ratio for 2005 was 3.42 which is a high asset turnover caused by the low profit margins. For the return on asset ratio, the company’s returns is moderately low, approximately 5%. The return for the company did improve from 2004, and it is showing improvement. Clear Channel’s return on common stockholders’ equity, 10.22%, is slightly higher then returns on asset, which might be because of leverage or trading on the equity at a gain. Earning per share (EPS) for Clear Channel is $1.71, which is a fine growth from the previous year, in which Clear Channel had a net loss. The almost 151% increase in the EPS is a noticed growth. With a Price-Earnings ratio of 20.45, implies that a number of investors are expecting higher earning growth in the future, compared with low P/E companies in the same industry. The payout ratio of Clear Channel is high, approximately 40%, which implies the company is focusing more on paying out its dividends, and also a reason why the percentage ratio is high is because of the substantially low growth rate. The high percentage of debt to total asset ratio is not favorable with investors, because it indicates that the company may not be able to meet its maturing obligations. For the year 2005 and 2004, we notice the percentage is very close to each other, approximately 53%, with no sign of improvement. Clear Channel’s time interest earned is low, 3.44 times, making it harder for the company to meet its interest payments, which does not appear to be lowering. Recent Company News On Nov. 9th, Clear Channel Communication Inc. (CCU) received a subpoena from the Assistant U.S. Attorney for the Southern District of New York, requesting documents about its advertising for gambling companies. This being the second subpoena CCU has received, the first one asked for information on the company’s commercial advertising run on behalf of offshore and online gambling businesses. This does not look to good for future investors because of the amount of money that will be loss, if they are not allowed to advertise for gambling companies. On Nov. 8th, France’s JCDecaux and other private-equity investors have stated their interest in buying the large rival, CCU. Clear Channel Communications Inc. stated, on Oct. 31, revenue at the company jumped almost 7% during the third quarter, but higher costs drove down profit nearly 10%. Clear channel communication’s Inc. top executive said on Oct 30th, “…a key measure of radio advertising sales is up 8.8% for the fourth quarter.” Company Strengths As of December of 2005, Clear Channel Communication Inc. owns 1,182 radio stations in United States, in which 150 were in the top 25 U.S markets. They also have made significant commitments to provide innovative services to their clients. Additionally, in the United States the company introduced a service guaranty, in which they have committed to specific monitoring and reporting services. Electronic displays have allowed Clear Channel to provide an alternative method to their clients’ advertisements. At December 2005, Clear Channel owned or operated approximately 164, 634 displays in Americas outdoor segment and approximately 710,638 displays in international outdoor segment. Also Clear Channel owned, programmed, or sold airtime for 41 television stations. Having about 26,500 domestic employees and 5,300 international employees, Clear Channel is the leader of its industry. Threats and Risk Factors Clear Channel Communication Inc. has a large amount of indebtedness; they currently use a portion of their operations income for debt service. Because of this high amount of indebtedness, the negative consequences are the inability to obtain future financing and their cash flow will be dedicated to interest obligations instead of other purposes. Clear Channel Communication business is dependent upon the performance of key employees, on-air talent and program hosts. Although the company has entered into long-term agreement with these individual, it is by no means guarantee that these key employees will remain with the company or retain their audiences. Other risks pertaining to Clear Channel Communication Inc. include the risk of doing business in foreign countries, some of these risks consist of being exposure to local economic condition, the adverse effect of currency exchange controls, and government polices against business owned by foreigners. Recommendation to Buy/Not Buy Highly recommend buying Clear Channel, it will be highly profitable for the investor. Clear Channel’s revenues declined $24.5 million compared to 2004, and their revenues for radio declined 6% compared to 2004. But, in April of 2005, the company announced a plan to strategically realign their businesses, in which Goldman Sachs is helping. During 2005, Clear Channel Communication Inc. reduced the number of commercial minutes broadcast on their radio stations. This will case the radio and the size of the audience listening to increase. The company also had revenue increase of 7% during 2005 in its international sector. What is also going to help Clear Channel to grow and help its stock number to rise is the recent news about other private-equity companies bidding for the company. Clear Channel is a low risk company with gradual gains for the investors. *Information stated in this analysis was gathered from Clear Channel Communication Inc. [CCU] annual 10k report. Access to this information is on www.sec.gov.
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