Acquisitions, Political Ads Help Sinclair Broadcast
The media sector has gained strength in the past four months.
In mid-May, the sector was a laggard — No. 26 of 33 sectors. As of Wednesday’s IBD, the media sector was No. 3.
Within the radio and TV industry group,Sinclair Broadcast ( SBGI ) is the only stock with a best-possible 99 in EPS Rating.
The Maryland-based company owns, programs or provides sales services to 74 broadcast television stations in 45 states.
In August, the board of directors declared a quarterly dividend of 15 cents a share, raising it from 12 cents.
The annualized yield is 5%.
The dividend, however, has a patchy history. In recessionary 2009, the company suspended the dividend. A special dividend of 43 cents a share was declared in November 2010. Quarterly dividends were resumed in the first quarter of 2011.
Earnings leapt 89% and 61% in the past two quarters. Revenue grew 23% and 34% in the same period. The Street expects earnings to surge 42% in the current quarter on a revenue gain of 40%.
Acquisitions are partly responsible for the performance. In April, Sinclair closed the acquisition of the broadcast assets of Freedom Communications, which involved eight stations. The deal gave Sinclair two more duopolies, one in West Palm Beach-Fort Pierce, Fla. and another in Albany-Schenectady-Troy, N.Y.
A duopoly is when two companies own virtually all of the market for a service. Acquisitions continued in the current quarter.
In July, Sinclair agreed to buy Bay Television, which owns WTTA-TV in Tampa, Fla. Also in July, Sinclair said it was buying six TV stations from Newport Television. The stations are in Ohio, Texas, Pennsylvania, Alabama, Florida and Kansas.
The deals are subject to FCC approval.
Another factor boosting Sinclair is the election season. Every four years, political advertising spending is elevated because of the presidential election.
The company’s three- and five-year stability factor is 8 and 20, respectively. The scale runs from 0 (calm) to 99 (erratic).