Buy free-to-air broadcaster ITV (ITV) ahead of the finals (27 Feb) which are likely to exceed market expectations. Strong numbers, after the one-off contribution of the UEFA European Championships and Olympic Games and better-than-expected cost savings, should prompt a one-off return of capital via a special dividend.

The experience of the 2010 World Cup in South Africa shows how a major sporting event has the potential to generate positive earnings surprises many months after a tournament. The £4 billion cap’s finals for that year (2 Mar’ 11), published seven months after the FIFA contest, exceeded consensus forecasts.

Many analysts have conservative numbers out in the market which do not factor in ITV’s likely outperformance of an admittedly difficult 2012 advertising environment. Its share of the advertising pie may also receive an early boost to 2013 following a dispute between WPP’s (WPP) GroupM advertising agency and Channel 4, with the former threatening to pull advertising in a dispute over price.

Broker Liberum Capital is predicting pre-tax profit of £474 million in 2012, 5% ahead of consensus, followed by £575 million in 2013, some 19% ahead of the market. It expects a capital return of close to £500 million.

Shares says: Broadcaster’s finals have scope to surprise on the upside. Buy ITV at 102p.