U.S. media companies are set to report revenue increases of 5 to 15 percent as they issue earnings reports over the next two weeks -- the best the industry has looked in at least two years.

So how can share prices of Walt Disney Co, News Corp, Viacom Inc and other television and film powerhouses already be falling out of fashion?

One big reason is concern that the rebound in advertising spending that is lifting results this year cannot be sustained in 2011, according to analysts, who list unemployment and a stagnant housing market among the main threats.

Consider the Standard and Poor's media index, which rose by nearly a third over the past 12 months and far outperformed the broader market.

In recent weeks the index has stalled, as have shares of all the major media companies. Time Warner Inc, CBS Corp and entertainment companies that were once red-hot buys are now treading water.

Company executives will likely have to ease worries about 2011 on conference calls to get the shares jumpstarted.

One of the difficulties right now is that they seem fairly valued, said Cowen and Co analyst Doug Creutz. A lot of that has to do with the uncertainty about what the economy and the ad environment is going to look like when we go into 2011.

Another Wall Street analyst, Anthony DiClemente of Barclays Capital, notes that spending by certain categories, such as retail, remain at risk because of weak employment.

Here is the big question people want to talk about: Are advertisers seeing any signs of that slowdown? he asks.

GOOD FOR NOW

So far, DiClemente said Madison Avenue is still spending.

Take Google Inc's results, which came out earlier this month and showed the rebound in ad spending helped drive a 24 percent rise in second-quarter revenue

Several newspaper companies, including The New York Times, have also shown improvement in ad sales.

That should bode well for Time Warner, Viacom, CBS, News Corp and Disney when they report quarterly earnings over the next two weeks. The third and fourth quarters could also show solid advertising growth from depressed levels of 2009.

We are seeing a very strong advertising environment continue well into third quarter and into the fourth quarter, said Michael Kupinski, a media analyst at Noble Financial.

One indication is the strong market broadcasters experienced in the recently completed upfront negotiations, the annual period when advertisers book commercial time for the fall season.

ABC, CBS, Fox and NBC fetched 8-9 percent price increases during the upfront, according to Barclays Capital Research. And pricing for the scatter market -- commercial time bought on a short-term rather than long-term basis -- remains robust.

Kupinski noted that the fall U.S. elections for congressional seats and U.S. gubernatorial races could provide an extra lift to revenue. The companies I've been speaking with indicated to me that whatever number you throw out, we'll probably exceed it, he said, referring to projected ad spending by political candidates as Republicans try to wrest control of Congress.

For the just-completed quarter, CBS revenue is expected to rise around 7 percent, News Corp by 15 percent and Disney by 9 percent, according to Thomson Reuters I/B/E/S.

As for earnings, all the media companies should also post increases from a year ago, with top analysts predicting that Walt Disney and News Corp are most likely to beat Wall Street estimates, according to Thomson Reuters StarMine. (Please see graphic: http://link.reuters.com/kas99m)

But stronger earnings are not likely to make stars of media company stock prices, given the worries about 2011. Nor will media companies likely return to the type of valuations they used to experience on Wall Street.

Even though stocks have rallied recently if you look at their trading multiples they are still way, way below historical norms, said SNL Kagan analyst Derek Baine. It shows even though the market is coming back, it is not clear if we will ever have the rah-rah days again.

(Reporting by Jennifer Saba, editing by Paul Thomasch and Matthew Lewis)

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