Media earnings make 'bull case'

Showbiz 50 grew by nearly 2% Wednesday

Earnings news from Disney on Tuesday and from News Corp. during Wednesday's trading wasn't dreadful, and that was enough to spur a media rally on Wall Street.

As the Dow rose 1.2% and the Nasdaq climbed fractionally, The Hollywood Reporter Showbiz 50 index grew by nearly 2%.

Leading the index was an ongoing rally at Carmike Cinemas, up 20% on Wednesday and 71% this week. But the sector's conglomerates also outperformed by wide margins Wednesday: Disney rose 12% to $25.87, CBS was up 9% to $7.98, Viacom Class B shares rose 7% to $21.71, News Corp. was up 6% to $10.65, Time Warner rose 3% to $24.96 and Sony was up 2% to $27.74.

Northlake Capital Management's Steve Birenberg said the media rally was set in motion last week with TW's decent results then kicked into high gear with a third consecutive positive earnings surprise from Discovery Communications.

Discovery shares are up 13% this week through Wednesday, and TW's are up 9%.

Disney's results were unimpressive on some levels, including the movie studio and theme parks, but cable TV held its own, and president and CEO Robert Iger said encouraging things about the economy in general and how the conglomerate's businesses are faring during the current quarter.

News Corp. chairman and CEO Rupert Murdoch also was cautiously optimistic after Wednesday's closing bell, so a media rally might have legs.

"Investors are now willing to look ahead to renewed ad growth and value the stocks on recovery earnings and cash flows," Birenberg said. "On that basis, valuations are not stretched, so a bull case can be constructed."

Earnings from CBS and DirecTV, due today, will be instructive, as will reports today from Sirius XM Radio, Carmike, Cablevision Systems, Activision Blizzard, Warner Music Group and other entertainment and media companies.