Guggenheim Raises Sinclair Broadcast EPS Estimate After Quarterly Print

Sinclair Broadcast Group Inc SBGI reported solid fourth-quarter revenue and adjusted EBITDA Wednesday on the back of record political spending for the midterm election. 

The company has repurchased around 11 percent of its total shares outstanding since August, and the key question for 2019 is whether it will continue to buyback shares or invest in M&A, according to Guggenheim.

The Analyst

Guggenheim’s Curry Baker maintains a Buy rating on Sinclair Broadcast with a $40 price target.

The Thesis

The telecommunications conglomerate recorded revenue of $893.3 million and adjusted EBITDA of $340 million, beating Guggenheim’s estimates of $877 million and $330.1 million, respectively. Core advertising continued to gain momentum after the election, with the fourth quarter winding up as the strongest quarter of the year, Baker said in a Wednesday note. 

Guggenheim raised its 2019 EPS estimate from $2.19 to $3.11.

The momentum in ex-political core advertising has been flattish in the first quarter, and the company expects this to ramp as the year progresses, the analyst said. 

Although auto has declined so far in the first quarter, Sinclair expects growth to be backend-weighted, Baker said. Services, which is Sinclair's second-largest category, remains strong, with growth accelerating in the first quarter, the analyst said. 

Sinclair guided to first-quarter adjusted EBITDA of $146-$151 million and projects free cash flow for 2018/19 and 2019/20 of $1.15-$1.22 billion and $1.2-$1.3 billion, respectively. 

Baker expects Sinclair Broadcast to continue to “aggressively pursue” M&A opportunities in 2019.

Price Action

Sinclair Broadcast shares were up 3.88 percent at $36.18 at the time of publication Thursday. 

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