US credit rating agency Moody’s has predicted that some global media and entertainment companies – those which it rates highly – are well positioned to deal with fallout from sluggish US growth and an imminent recession in Europe.
“Although a global economic downturn led by the US and Europe would put downward pressure on earnings for investment-grade media and entertainment companies, we believe most ratings would stand up well,” said Neil Begley, a Moody’s analyst and co-author of the report. “But that resilience varies depending upon financial flexibility within the company’s current rating, and its exposure to cyclical revenue volatility.”
The 31 media and entertainment companies profiled in the report are divided into four categories of relative downgrade risk based on these three factors, but Moody’s notes that no companies are in the vulnerable category that indicates the highest relative risk of a downgrade in a recession.
“Six companies – Interpublic Group, McGraw-Hill, Omnicom, UBM, Washington Post and WPP – are relatively exposed to a downgrade, while 17 are moderately exposed and eight have limited exposure,” says John Puchalla, another Moody’s analyst and co-author.
The last such report covering the sector released in 2007 included a handful of companies in the vulnerable category, all which were subsequently downgraded, and all but one of the companies in the lowest risk category were eventually upgraded.
Moody’s maintains its forecast for a modest global recovery over 2012 and 2013, with expected real growth of around 3.0% for G-20 economies in 2012 and 3.5% in 2013. The euro area is expected to experience a mild recession.
A separate and wide-ranging report issued last June by London-based professional services firm PriceWaterhouseCoopers observed that the world’s entertainment and media (E&M) companies must reshape and retool as the industry enters a “new normal”, with digital embedded in business-as-usual and moving to the heart of media companies worldwide.