Lin TV shares drop as investors reconsider 1Q results

Lin TV shares dropped $1.36, or 12.8 percent, to $9.30 in afternoon trading. The stock has traded between $8.89 and $20.24 during the past 52 weeks. Lin TV's shares had initially gained 6 percent on Thursday after the company's earnings release.

Early Thursday, Lin TV reported that it swung to a profit, excluding discontinued operations, as increased digital and political advertising revenue helped offset national and local ad weakness.

Also Thursday, Lin TV forecast second-quarter revenue below analyst expectations, and predicted that political and digital advertising growth will again drive its results. The company's core revenue has suffered because of weakness in some key ad categories like housing, auto and retail.

The drop in Lin TV's stock on Friday coincided with a broader market decline, as soaring energy prices and a wider-than-expected losses at insurer American International Group stoked Wall Street's concerns about the health of the broader economy.

But overall, analysts were less pessimistic than investors about Lin TV's prospects. Wachovia Capital Markets analysts Marci Ryvicker maintained the company's "Market Perform" rating, although the revenue results missed her expectations.

Ryvicker said the company's second-quarter outlook also fell short of her expectations, but blamed the miss on her too-optimistic political advertising forecast.

In the second half of the year Ryvicker expects revenue related to political ads, the Olympics and retransmission consents to help offset the core advertising weakness. According to FCC rules, cable operators must have consent agreements from broadcast stations to retransmit their signal.

Stifel Nicolaus analyst Kit Spring, who has assigned the company a "Hold" rating, also expects Lin TV to benefit from retransmission fees as current agreements are renegotiated. Spring also expects the company to get a boost from Internet revenue.