Christian Broadcaster runs into some skepticism on short term.

IN its bid to build clusters of Christian radio stations around the country, Salem Communications Corp. is running into some resistance on Wall Street.

Last week, the Camarillo-based broadcasting company was trading at under $19 a share, compared with more than $30 a little over a year ago. That drop-off came despite first-quarter net income more than doubling from the like period a year earlier.

What's the problem? Prospects for the second quarter. The company projects earnings per share of 11 cents to 13 cents, lower than analysts' expectations of 17 cents.

"They've had an exorbitant number of start-up properties purchased over the past six months," said Stanford Group analyst Frederick W. Moran. "At this point they have more properties in a start-up mode than I've seen in a long time."

Some of the decline reflects wider problems in the radio industry, which has suffered from soft advertising and competition from new technologies. Still, Salem's 40 percent stock drop over the past year easily eclipsed the industry average of 23 percent.

The largest Christian radio broadcaster in the country with 105 stations, Salem has been on an acquisition binge in order to build clusters in each of its two strongholds--traditional Christian teaching and contemporary Christian music--while moving more strongly into news/talk. Salem operates 32 news/talk stations, up from 15 at the beginning of 2004, and has plans for more.

The long-term value of the acquisitions hasn't entirely been lost on analysts, who note the growth of Christian radio in national ratings and ad revenue. To some extent, Salem is mimicking the strategy of its secular rivals such as Clear Channel Communications Corp. and Viacom Inc.'s Infinity Broadcasting division, by building clusters of stations in individual markets to share studios and market advertising.

"We think we bought those stations at attractive prices and once we invest in them and grow them to maturity, they'll be very attractive investments," said David A.R. Evans, executive vice president and chief financial officer.

In Los Angeles, Salem owns the contemporary Christian station KFSH-FM (95.9), the Christian teaching station KKLA-FM (99.5) and the news/talk station KRLA-AM (870). All three operate out of a common facility in Glendale.

Daniel Anstandig, vice president of adult formats for the Cleveland consulting firm of McVay Media, said that the talk radio expansion could be risky. "There have been some successes in some markets, but it had not produced great ratings nationwide," he said.

Evans thinks it comes down to a Wall Street thing, noting that analysts "tend to be more oriented to the short term."