Media

Deflationary pressures in the media space as a result of cord cutting and changing consumer consumption habits are undermining profit prospects. To make matters worse, the service sector is closing the gap with the weakening manufacturing sector: the latest ISM non-manufacturing survey showed a large drop, particularly in its employment component. Worrisomely, industry productivity (sales/employment) has ground to a halt, warning that relative profits will likely disappoint in the coming quarters, the opposite of what sell-side analysts are currently anticipating for the next 12-months (bottom panel). With media credit spreads steadily widening following the debt binge to retire equity, the risk premium in this sector is set to steadily widen. We reiterate our high-conviction underweight stance. The ticker symbols for the stocks in this index are: DIS, CMCSA, TWX, TWC, FOXA, CBS, OMC, VIAB, IPG, NWSA, DISCK, TGNA, CVC, SNI, DISCA, CMCSK, FOX, NWS. bca.uses_in_2016_02_05_001_c1 bca.uses_in_2016_02_05_001_c1