Media meltdown: Shares of Time Warner and Viacom have both slumped this year.

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Entertaining buyers Media stocks look like decent values given their growth rates. Company  '06 P/E  '06 Est. EPS Gr  LT Est. EPS Gr.  Disney  16.1  16%  14%  News Corp  17.4  18%  16%  Time Warner  20.2  16%  12%  Viacom  15.6  14%  14%  S&P 500  15.1  7%  9%   * based on data as of 10/28/05  Source:  Thomson/Baseline

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NEW YORK (CNN/Money) – The year is almost over...and it's not a moment too soon for major media companies.

This will go down as a year that Viacom and Time Warner, which report quarterly results this week, would like to forget. Shares of Time Warner, which owns CNN/Money, are down 8.5 percent while Viacom's stock has tumbled 15 percent.

Walt Disney and News Corp have also had a tough time. Disney's stock has fallen 14 percent and News Corp.'s is down nearly 25 percent.

All four companies have been plagued by concerns about the Hollywood box office slump.

There are also worries that the popularity of digital video recorders (DVRs), which allow viewers to skip commercials, will make TV advertising less lucrative.

Finally, there are fears that rapidly growing online media firms -- mainly Google and Yahoo! -- will continue to pull dollars from more traditional forms of advertising.

Still, there is some growing optimism as analysts look ahead to 2006, when each company is expected to post earnings growth in the neighborhood of 15 percent.

One driver could be a rebound in traditional advertising. "Next year should be an up year with the Winter Olympics and more political dollars from the mid-term elections," said Joseph Bonner, a media analyst with Argus Research.

Wall Street, which has been skeptical of media companies, has started to take notice.

CIBC World Markets began coverage of News Corp (Research) in mid-October with an "outperform" rating. SG Cowen raised its rating on Disney (Research) to a "buy" on Thursday. Citigroup launched coverage of Disney and Time Warner with a "buy" rating on Friday. And Oppenheimer initiated coverage on Time Warner with a "buy."

In particular, the analysts like that the stocks are trading at just a slight premium to the S&P 500 despite well above average growth.

"The whole group is oversold," said Alan Gould, an analyst with Natexis Bleichroeder. "If the big fears are migration of ad dollars from old media to new media, DVRs and piracy, then I think the stocks have gotten low enough that they reflect these risk factors."

Although some think the entire sector looks attractive, each media company has specific issues, particularly with Viacom, which reports its results on Tuesday, and Time Warner, whose numbers are due out on Wednesday.

For Viacom (Research), analysts are predicting sales growth of 6 percent, to $5.8 billion, and earnings growth of about 7 percent, to 45 cents a share. But investors will be most interested in hearing more about Viacom's plans to split into two firms by the end of this year.

One will keep the Viacom name and will own the company's more rapidly growing units, such as the MTV and Nickelodeon cable networks and the Paramount movie studio.

The other company, to take the name CBS, will own that broadcast network and other mature divisions, such as the Infinity radio division and the Simon & Schuster book publishing unit.

CBS will pay a dividend and Viacom will not.

Gould said Viacom could be due for a rally soon since the break-up is closer to reality.

"Shareholders that want one part or the other may be waiting for the split before getting interested in buying the separate pieces. If you are growth oriented, you'll want the new Viacom as opposed to CBS. But if you are more of a value investor, you may want CBS."

Time Warner's revenues are expected to increase by 4 percent, to $10.4 billion, and profits are forecast to increase by 20 percent from a year ago, to 18 cents a share.

But investors will be most interested in hearing what CEO Richard Parsons has to say about critical comments from shareholder Carl Icahn, who has been pushing Time Warner (Research) to buy back more stock than it has planned and to spin-off all of its cable assets.

Wall Street will also be looking for any clues about the future of Time Warner's America Online unit, which is currently being wooed by Microsoft (Research), a partnership of Google (Research) and Comcast (Research), and Yahoo! (Research)

AOL's prospects have turned around lately, despite continued declines in dial-up subscribers, due to the company's decision earlier this year to make most AOL content free to all Web users. This has helped AOL benefit from the online advertising wave.

Bonner said he'll be focusing most closely on operating performance at AOL and the company's film division. Revenues from filmed entertainment accounted for nearly a quarter of Time Warner's total sales in the second quarter. But sales slumped 15 percent from a year ago and operating profits sunk 60 percent.

Disney and News Corp are scheduled to report their latest quarterly results in mid-November.

For a look at more media and entertainment stocks, click here.

Will Hollywood bounce back in 2006? Click here.

Natexis Bleichroeder's Gould owns shares of News Corp. and Viacom but his firm does not have any investment banking ties to the companies. Argus' Bonner does not own any of the stocks mentioned and his firm has no banking relationships with the companies.

The reporter of this story owns shares of Time Warner through his company's 401(k) plan.