Media shares off on consumer report, ad worries

By Gina Keating

LOS ANGELES (Reuters) - Investors punished shares of the Walt Disney Co and other large media companies on Friday after U.S. consumer sentiment hit a two-year low and sparked worries about cuts in advertising, analysts said.

Shares of Disney fell nearly 5 percent on Friday, a day after the No. 2 U.S. entertainment company reported quarterly results generally in line with Wall Street expectations, but said economic factors in 2008 could hurt its performance.

Shares of Time Warner Inc were down as much as 3 percent, Viacom Inc shares dropped more than 3.5 percent and CBS fell 2.6 percent as the broader market slid 1.9 percent. The companies reclaimed some of their losses in early afternoon trade, but continued trading below the Dow Jones average.

"Media is getting hit and broadcasting stocks too," Lehman Bros analyst Anthony DiClemente said. "At the end of the day, media is a consumer driven business and the bottom line for today, anyway, is the University of Michigan consumer sentiment (surveys)."

The Reuters/University of Michigan Surveys showed a sharp fall in consumer confidence in early November. The gauge of consumer sentiment fell to 75.0 from October's result of 80.9, well below analysts' expectations.

SMH Capital analyst David Miller said concerns about softness in advertising markets may be spilling over onto big media companies, even though most reported strong sales and outlooks last quarter.

"Anything that is exposed to advertising in general is really getting hurt here... because advertising is a discretionary expense," Miller said.

"People are worried about '08, about the economy, and media stocks are a consumer discretionary sector."

Disney Chief Financial Officer Tom Staggs said on Thursday afternoon on a post-earnings conference call that the company's theme parks and media networks are showing no signs of an economic downturn but that a Hollywood writers strike, if protracted, could affect results.

He added that "concerns over the economy and, more specifically, travel and tourism and the ad market are of consideration for many companies this year."

DiClemente said investors may be oversimplifying by lumping Disney with consumer stocks and conflating trends in local and national advertising.

Shares of Disney were trading down 2.5 percent $32.78 on the New York Stock Exchange. Time Warner was down 1.8 percent at $17.39 on the NYSE. Viacom was down 2.9 percent at $40.30 and CBS was down 1.5 percent at $26.87 on the NYSE.