• by Wayne Friedman , January 29, 2010

Advertising revenues have shown vast improvement for virtually all major media companies recently -- but this has not translated into across-the-board improvements in stock prices.

Michael C. Morris, U.S. entertainment analyst for UBS Equity Research, writes in a recent report that eight major ad-supported companies the group covers had positive results for their fourth-quarter financial reporting periods. But gains did not always translate to the stock market, which registered mixed results.

"Investors may be exposed to an ad 'hangover' after earnings," he writes recently. "We believe that more highly ad-exposed companies will struggle in the near-term as the ad marketplace is not incrementally stronger than current investor expectations."

In addition, stagnant stock-market price growth could be increasingly tied to ad prospects. "We believe that the expectation of an improved advertising environment has been the single most important driver of media shares since May of 2009."

UBS's Ad Trend Tracker shows "bottoms up" advertising sales trends by media for the past eight quarters. This covers broadcasting, cable networks, online, outdoor, radio and print. UBS says to look for single- to-mid-digit percentage gains in the overall domestic advertising environment in 2010.

Morris picks for strong results: Walt Disney, DreamWorks Animation, Scripps Networks, Time Warner and Viacom.

UBS says, analyzing all the media companies it follows, about one-third of their average collective revenue comes from advertising.