Sinclair Broadcast Group reported better-than-expected quarterly earnings Wednesday and boosted its quarterly dividend after seeing strong growth in political advertising sales.
The Maryland-based TV station owner said revenue jumped nearly 19 percent to $766.3 million, compared with $644.5 million in the third quarter of 2017.
The company earned $63.9 million, or 62 cents per share, in the three months that ended Sept. 30, compared with $30.6 million, or 30 cents per share, in the same period of last year, it said. Analysts expected earnings of 56 cents per share.
The news sent Sinclair shares higher Wednesday, closing up 82 cents at $31.39 each.
Results came in ahead of guidance in all key financial measures, the company said. Sinclair said it expects to end the year with the strongest balance sheet in company history.
"Anyone who doubted the power of local TV's brand awareness capabilities needs to look no farther than this year's political spending," said Chris Ripley, Sinclair's president and CEO, during a conference call with analysts, noting that up to $253 million in political advertising was spent this year on Sinclair stations.
"This year's mid-term election will not only be the largest mid-term political year in our history but will also surpass every presidential election year in our history other than 2012," Ripley said. "We believe this is a strong indicator of just how robust 2020's presidential year political spending will be."
Sinclair, the largest U.S. owner of local TV stations, expects political ad sales to be up 60 percent compared with the 2014 mid-term election cycle and 20 percent compared with the 2016 presidential year. Sales from political ads in the third quarter soared to $70 million, compared with $7 million in the third quarter of 2017, a non-election year.
Those results prompted the increase in quarterly dividend by two cents to 20 cents per share.
Tuna N. Amobi, an equity analyst with CFRA Research, kept a hold opinion on Sinclair's shares and raised its 12-month target price by $3 to $35 per share, noting the company's increase in revenue was fueled by political ads, digital revenues and retransmission fees, which cable and satellite TV providers pay Sinclair to include its stations in channel lineups.
"Following a recent termination of (Sinclair's) potentially transformative $3.9 billion deal for Tribune Media amid regulatory scrutiny, (Sinclair) likely remains open to future M&A opportunities for further consolidation in the television industry," Amobi said in a note.
Sinclair's quarterly results included $18 million in ticking fee costs related to financing commitments for the failed acquisition. Tribune Media pulled out of the planned merger on Aug. 9 after the FCC sent the merger for review by an FCC administrative hearing judge in the wake of FCC Commissioner Ajit Pai raising "serious concerns" about the deal being in the public interest.
Chicago-based Tribune had said Sinclair caused regulators to sour on the deal by trying to sidestep the need to sell television stations to meet national ownership guidelines. Tribune Publishing, the parent of The Baltimore Sun, split off from Tribune Media in 2014.
Sinclair also said it repurchased 5 percent of its outstanding shares after its board approved a $1 billion share buyback in the last quarter.
Sinclair also announced it agreed to a consent decree with the Department of Justice to resolve an investigation into the sharing of information among stations in some local markets. The company expects Justice to file the decree by Thursday and said it is not an admission of any wrongdoing and does not include any monetary damages or penalties. Sinclair was required to adopt additional compliance measures, Ripley said.
"We agreed to do this consent decree despite our belief that there was no actual impact on pricing of advertising or any violation of antitrust laws, because the costs of compliance with the consent decree are minimal," Ripley said. "This allows us to avoid the potential significant cost of continuing to dispute this with the DOJ and a potential lawsuit."
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