Our latest featured recommendation owns or services 46 local television stations and operates online media properties, including Cars.com and Careerbuilder.com, notes Elliott Gue, editor of Capitalist Times.
TEGNA (TGNA) came into being when the former Gannet Company spun off its newspaper publishing assets.
TEGNA posted mixed first-quarter results, with revenue growth at Cars.com slowing and sales of political advertisements surprising to the upside relative to the 2012 presidential election.
TEGNA’s portfolio of television stations in top-25 markets should benefit from heavy spending on political advertisements in the third quarter and part of the fourth quarters.
Sales of political ads should be particularly robust in the swing states of Ohio, Florida and Colorado.
Meanwhile, NBC’s coverage of the Summer Olympics should also boost ad revenue.
Whereas robust spending on political ads should drive revenue growth in the back half of the year, TEGNA is also expected to receive a sizable sales bump in 2017 after negotiating higher retransmission fees from satellite, cable and telecom companies to carry its local television signals on their systems.
However, reverse network compensation fees to NBC affiliates will also increase next year, offsetting some of the upside from retransmission fees.
Management reiterated its earlier guidance for Cars.com to grow its revenue by 10 percent this year, driven by robust car-buying activity and the launch of new functions that assist consumers planning to trade in their vehicles and reports that help dealers to quantify the website’s influence on walk-in traffic.
The turnaround at CareerBuilder.com also continues, with revenue from this online property declining by 2 percent from year-ago levels — an improvement from previous quarters.
Management reaffirmed its expectation that this business would return to sales growth in the second quarter, as the company offsets pricing pressure with a higher volume of lower-end job listings and continues to grow its software-as-a-service offerings for human-resource professionals.
With a strong balance sheet and solid free cash flow, TEGNA can afford to continue its investment in digital media and software-as-a-service solutions; the big question is whether these capital expenditures will pay off over the long haul.
TEGNA rates a buy up to $34 per share for aggressive investors.
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By Elliott Gue, Editor of Capitalist Times
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