Radio Stocks Soar on Advertising Forecasts, Cumulus Earnings

Radio companies, suffering from sluggish radio advertising and underwhelming stock prices, might be starting to see the light. B Riley Securities analyst Daniel Day expects national advertising to pick up in the second half of 2023. That hint of optimism, along with Cumulus Media’s better-than-expected second-quarter earnings released Friday, sent radio stock prices soaring over the last few days.

Cumulus’s net revenue of $210.1 million was down 11% year over year and 25% below the same quarter in pre-pandemic 2019, the company announced Friday. Earnings before interest, taxes, depreciation and amortization (EBITDA) of $30.7 million was down 32.6% from the prior-year period, but was helped by wringing out $12 million of cost reductions. Revenue was in line with the company’s expectations while EBITDA exceeded expectations. Adjusted EBTIDA of $28.7 million was 32% above the estimate of Noble Capital Markets analysts.

That was good news for some investors. Shares of Cumulus climbed 14.5% to $5.54 on Friday and rose another 14.4% to $6.34 on Monday. Even after Cumulus gave back some of those gains on Tuesday (Aug. 1) and dropped 11.7% to $5.60, its share price was more than 2.5 times above the 52-week low of $2.57 from May 9. On Monday, B Riley upped its Cumulus price target from $10 to $11 — implying 96% upside from Tuesday’s closing price — and maintained its “buy” rating.

The trends could portend good news for other radio companies. On Monday, shares of iHeartMedia rose 12.4% to $4.73. Even after dropping 3.2% to $4.58 on Tuesday, iHeartMedia’s stock stood at more than double its 52-week low of $2.21 set on May 26. iHeartMedia will report second-quarter earnings on Aug. 8.

For Cumulus, the quarter was all about optimizing what it can control while mitigating the downside of what it cannot control, said president and CEO Mary Lerner during Friday’s earnings call. “This proven skill set is serving us well as we make the best of the current tough ad environment,” said Lerner.

Cumulus cut $5 million of fixed costs, repurchased $5.7 million of its common stock in the second quarter, bringing the total repurchases to $39 million, and retired about $32 million of bonds at an average discount of 26%. It also announced the sale of WDRQ-FM for $10 million that is expected to close this quarter. Digital revenue of $37.5 million was down just 0.7% from the prior-year period. Cumulus’ digital marketing services businesses were up 21% year over year while its podcast audience was up 19%.

What Cumulus cannot control is the willingness of brands to buy advertising. A weak national advertising environment since late 2022 “remained the main factor driving a decline in total revenue,” said Frank Lopez-Balboa, Cumulus executive vp, treasurer and chief financial officer. Local spot advertising revenue — which accounts for 80% of Cumulus’s total stock revenue — was down 7% while soft national advertising caused total broadcast radio revenue to fall 16.5%.