The COVID-19 pandemic-led lockdowns made people spend more time on media and entertainment at home. This trend fueled the demand for broadcast and media technology. Moreover, accelerating on-demand content penetration and live video streaming increased the popularity of digital advertising. Evolving network infrastructure has also been driving the industry’s growth.
The global broadcast and media technology market stood at $41.40 billion in 2021 and is expected to reach $62.12 billion by 2027, growing at a CAGR of 6.9%. Increasing investments in technological advancements, the rapid adoption of next-gen linked devices, online content consumption, and enhanced customer experience should keep driving the industry’s growth.
Given this backdrop, we think it could be wise to invest in high-quality broadcasting stocks Nexstar Media Group, Inc. (NXST) and Sinclair Broadcast Group, Inc. (SBGI).
Nexstar Media Group, Inc. (NXST)
Headquartered in Irving, Texas, NXST is a television broadcasting and digital media company that emphasizes the acquisition, development, and operation of television stations, interactive community websites, and digital media services in the United States.
Last month, Nexstar Media Inc., a wholly-owned subsidiary of NXST, announced that it would augment its local news operations serving Washington, D.C., Maryland, and Northern Virginia. The company plans to bring together its two television stations currently serving the area, WDVM-TV (Ind) in Hagerstown, and WDCW-TV (CW) in Washington, D.C., at one central location in the nation’s capital. The new, combined operation will be known as "DC News Now."
NXST’s 60.47% trailing-12-months gross profit margin is 19.2% higher than the 50.74% industry average. Its 18.67% trailing-12-months net income margin is 302.3% higher than the 4.64%. In addition, its 37.57% trailing-12-months EBITDA margin is 91% higher than the 19.67% industry average.
In the first quarter ending March 31, 2022, NXST's net revenues increased 8.6% year-over-year to $1.21 billion. Its income from operations grew 15.6% from its year-ago value to $329.40 million, while its net income came in at $251.40 million, up 26.2% from its prior-year quarter. The company's EPS rose 35.5% year-over-year to $5.99.
The consensus EPS estimate of $5.04 for the second quarter ending June 2022 represents an 11.8% year-over-year growth. Analysts expect revenue to increase 9.1% year-over-year to $1.23 million for the second quarter ending June 2022. In addition, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 12.3% over the past year and 15.2% over the past nine months.
NXST's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has a B grade for Quality. Within the C-rated Entertainment - Broadcasters industry, it is ranked #2 of 12 stocks.
To see additional POWR Ratings for Growth, Momentum, Value, Sentiment, and Stability for NXST, click here.
Sinclair Broadcast Group, Inc. (SBGI)
Headquartered in Hunt Valley, Maryland, SBGI functions as a media company in the United States. The company has two operational segments: Broadcast broadcasts free over-the-air programming, such as network-provided programs, locally-produced news, and local sporting events, and Local Sports operates regional sports networks.
SBGI’s 36.96% trailing-12-months net income margin is 696.7% higher than the 4.64% industry average. Also, its 56.38% trailing-12-months levered FCF margin is 471.7% higher than the 9.86% industry average.
In April, SBGI announced its plans to offer high dynamic range (HDR) content for its Bally Sports Regional Sports Networks (RSNs) beginning in the third quarter of 2022. Premier demonstrations are being shown at the NAB 2022 Show. SBGI is working closely with its Bally Sports RSNs and technology vendors and has provided an "end-to-end" approach to transition the sports industry to a more realistic and indulging viewing experience. Leveraging "Advanced HDR by Technicolor," high-quality sports programming will be improved by intelligently expanding the dynamic range (contrast) and increasing the color gamut to match more closely to real-world experiences.
Also, in April, SBGI announced that it would offer the entire broadcast industry an open-sourced version of its reputed Broadcast App as a common baseline for hybrid TV. Enabling the feature of merging over-the-air and Internet-delivered programming is the Broadcast App. The key factor in the new delivery ecosystem is understanding that broadcast and broadband services can be combined to provide the best of over-the-air and Internet-delivered content. That interactive technology enables viewers to choose content regardless of how it gets to their screens.
For the first quarter ending March 31, 2022, SBGI’s total revenues amounted to $1.29 billion. Its operating income grew 9782.9% from its year-ago value to $3.46 billion, while its net income amounted to $2.59 billion compared to a net loss of $12.00 million. The company’s EPS came in at $35.39 compared to a loss per share of $0.16 in the prior-year quarter.
The company's EPS is expected to grow 278.9% year-over-year to $0.95 in the third quarter ending September 2022.
SBGI's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Quality and Value.
Within the Entertainment - Broadcasters industry, it is ranked #1. In total, we rate SBGI on eight different levels. Beyond what we've stated above, we have also given SBGI grades for Stability, Sentiment, Growth, and Momentum. Get all SBGI ratings here.
NXST shares were trading at $166.83 per share on Wednesday morning, up $1.64 (+0.99%). Year-to-date, NXST has gained 11.67%, versus a -20.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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