7 Top-Rated Media Buys

NEW YORK (TheStreet) -- Walt Disney (DIS), News Corporation (NWSA), McGraw-Hill (MHP), IMAX (IMAX), Meredith (MDP), Focus Media (FMCN) and Time Warner (TWX) are media-related stocks with nearly 75% buy ratings, as polled by Bloomberg.

These seven media-related stocks topped broader indices during the last 12 months. Collectively, they garnered 66% gains during the last year, compared to the Dow's 25%. Analysts rated these stocks highly and their earnings are seen growing at 20% to 22% over the coming year. The stocks have average buy ratings of 63% and analysts identify a mean upside potential of 18% to 20%, according to Bloomberg consensus.

The stocks are stacked in terms of buy ratings, great to greatest.

7. McGraw-Hill ( MHP) is a leading global financial information services company and holds leading brands like Platts Energy Information, McGraw-Hill Education and Standard & Poor's.

Total revenue for the first quarter of 2011 stood at $1.3 billion, up 7.7% from 2010 first quarter. The revenue boost came from McGraw-Hill Financial, which grew 16.2% to $324 million in the first quarter.

Operating income during the first quarter increased 12.7% to $214.4 million from the comparable period in 2010. During the quarter, net income improved 16.1% year-over-year to $124 million. Positively, the increase in first quarter earnings came while making investments in segments like digital education.

Cash and short-term investments at the end of March stood at $1.3 billion. Management expects diluted earnings per share of $2.79 to $2.89 for 2011. The stock is trading at 16 times its estimated 2011 earnings and analysts assign 55% buy ratings on the stock, according to Bloomberg consensus.

6. Meredith ( MDP) is a media and marketing company operating in two business segments: national and local media. The company's national media segment contributes nearly 80% toward total revenue from magazine publishing, integrated marketing, interactive media and other related operations. The local media segment comprises operations of network-affiliated television stations and related interactive media operations.

During the first nine months ending March 31, revenue rose to $1.05 billion, up $30 million from the comparable prior-year period. Advertising and other revenue grew the fastest during the first nine months.

Net profit improved 37.5% year-over-year, driven by cost rationalization and lower interest outgo. Operating income grew 35% year-over-year to $169 million.

Analysts' consensus estimate pegs average gains at 24% over the next year with buy ratings of 57%. The stock is trading at 11 times its estimated 2011 earnings.

5. Walt Disney ( DIS) is a worldwide entertainment company operating in segments like media networks, resorts, studios, interactive media and consumer products.

Total revenue for the first quarter of 2011 was $9.08 billion, up 6% year-over-year compared to the previous year. Diluted EPS rose 2% during the same period. Overall, the company's media networks segment performed exceptionally well, registering 12% and 17% growth in revenue and operational income, respectively.

The company's operating cash flows for the first six months increased 23% to $3.1 billion over the same period prior year due to higher operating cash receipts from segments such as media networks, resorts and consumer products. However, free-cash flows came lower on higher capital expenditure as the company made final payment in relation to Disney Dream, resort expansions, and spending on theme parks. Total investments in parks, resorts and other property stood at $1.85 billion.

Analysts expect the stock to gain around 22% over the next year and affirm 60% buy ratings.

4. IMAX Corporation ( IMAX) is a motion picture technology company engaged in the design, manufacture and sale of digital theater systems.

During the first quarter of 2011, the company signed contracts for 101 theater systems, compared to 41 signed in the first quarter of the prior year. IMAX now expects to install between 115 and 125 new theaters in 2011, higher than the earlier estimated 80 to 90 installations.

Management expects its commercial theater network to grow at least 30% in 2011, for the third consecutive year. Management foresees international and small-to-mid-tier domestic markets as growth areas. Richard L. Gelfond, IMAX CEO, commented on the growth areas, "We made significant inroads in several of the BRIC nations, particularly in China, where we signed our first full joint revenue sharing arrangement for 75 theaters with Wanda Cinema Line, the largest international theater deal in our history. Domestically, we continued to penetrate small to mid-tier domestic markets with new theater agreements with prominent regional exhibitors like Premiere Cinema Corp. and Warren Theatres."

On average, analysts expect the stock to gain 25% over the next year. The stock is trading at 21 times its estimated 2012 earnings with 63% buy ratings.

3. Time Warner ( TWX) is a media and entertainment company operating in segments like networks, filmed entertainment and publishing.

For 2011 first quarter, revenue rose 6% to $6.7 billion from the same period last year, as the networks segment posted 18% growth during the quarter. The filmed entertainment segment was a drag on operating income, declining 10% year-over-year to $1.3 billion. Operating income margins were 19% vs. 22% in the same quarter prior year.

On the recent initiatives, Jeff Bewkes, the company's CEO, said, "We expanded the availability of our HBO GO streaming service to mobile devices; reached agreement with Apple to enable our Time, Fortune and Sports Illustrated print subscribers to access the iPad editions of these magazines at no extra cost; and, through Warner Bros., launched our test of premium video on demand. We've also bought back $1.3 billion of our shares so far this year, double the pace of last year. That reflects our confidence in our competitive position and growth prospects and our commitment to continue improving shareholder returns."

Analysts project 12% upside over the next year with 65% buy ratings.

2. News Corporation ( NWSA) is a diversified global media company operating in segments like filmed entertainment, television, cable network programming, newspapers, information services, publishing and others.

Operating income for the third quarter ended March 31 was $1.06 billion vs. $1.25 billion reported a year ago. A $125 million pre-tax charge related to the settlement of litigation at its Integrated Marketing Services segment weighed on the results. Third quarter 2010 financial results recognized the extraordinary contribution made by Oscar-winning movie Avatar to its filmed entertainment business, boosting operating income last year.

After the first quarter of 2011, Rupert Murdoch, CEO, said, "I'm particularly pleased that our Television segment, viewed by the market just one year ago as a challenged business, more than quadrupled its earnings contributions over the prior year quarter. And our largest earnings generator, Cable Networks, increased earnings 25% on 13% revenue growth. I fully expect these vibrant businesses to continue driving future profit growth for News Corporation and to ensure our strength in the years ahead."

The stock is trading at 16 times its estimated 2011 earnings and analysts expect 15% upside over the next one year.

1. Focus Media Holdings ( FMCN) is a digital media company.

Net revenue for the first quarter of 2011 was $146.6 million, exceeding the company's own guidance range of $122 million to 124 million. Net revenue improved 50% year-over-year during the March quarter.

Commenting on the future plans, Jason Jiang, Focus Media's CEO, said in a press statement, "We plan to launch Focus Media's next generation of screens in seven cities in the second half of this year. We believe these next-generation screens will equip Focus Media with capabilities to provide interactive, measurable, location based search (LBS) services to advertisers, which we believe is of great importance for Focus Media's next era of growth. We also plan to embark upon a small minority investment in a company that will work hand in hand with Focus Media to provide online and mobile services support to enhance Focus Media's LBS capability."

Net income for the first quarter of 2011 was $42.4 million, also beating its earlier guidance range of $36 million to $38 million for the first quarter. The stock is up 47% year-to-date. Analysts expect the stock to gain around 22% over the next one year and assign buy ratings of 75%.

>>To see these stocks in action, visit the 7 Top-Rated Media Stocks to Buy portfolio on Stockpickr.

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