Sinclair Broadcast reports drop in sales and profits for third quarter

Sinclair Broadcast Group Inc. reported a drop Wednesday in third-quarter sales and earnings, said its planned $3.9 billion deal to buy Tribune Media Co. remains on track and put to rest speculation that it plans to hire former Fox News host Bill O’Reilly.

In announcing results for the quarter ended Sept. 30, Hunt Valley-based Sinclair addressed ongoing criticism over its controversial plans to acquire Tribune Media under broadcast ownership rules that federal regulators revised earlier this year.

A planned review of rules that could further deregulate the television broadcast industry by the Federal Communications Commission reflects a recognition of how the competitive marketplace has changed, said David Smith, Sinclair’s executive chairman, in a statement Wednesday.

“Broadcasters actually do compete against everyone for viewers and advertising dollars,” Smith said. “Their review also recognizes that the current rules no longer reflect the realities of today’s media landscape and consumer viewing habits. We applaud the FCC’s action to level the playing field, especially in light of emerging technologies and consolidation in the telecom and cable industries.”

During a morning conference call with analysts, Sinclair President and CEO Chris Ripley responded to a question about the broadcaster’s reported interest in hiring O’Reilly, who was forced out at Fox amid sexual harassment allegations.

“We get approached all the time by a lot of people,” Ripley said. “He did approach us. … We do not have any interest in hiring him.”

On Wednesday, Sinclair reported that its income dropped 40 percent to $30.6 million in the July-to-September period, from $50.8 million in the third quarter of 2016.

Per share earnings fell to 30 cents in the quarter, from 54 cents a year earlier. Wall Street analysts had expected earnings of 42 cents per share.

The impact of recent storms during hurricane season cut into revenues, which fell 3.3 percent to $670.9 million and just missed analysts’ estimates of $672.1 million, the company said. The decrease included $3.1 million of lost revenue as a result of the hurricanes and other one-time adjustments.

In Wednesday trading, Sinclair shares closed down 2 percent at $31.05 each.

An analyst at CFRA Research cut its 12-month target price on Sinclair’s stock by $8 to $36 per share. But analyst Tuna N. Amobi said improvements are likely in the fourth quarter and next year as the company benefits from political ads during the 2018 mid-term elections and a favorable regulatory environment that could spur more merger and acquisition activity once the Tribune deal is finalized.

The broadcaster stands to benefit from political advertising in senatorial and gubernatorial races in states where Sinclair has a presence, including Florida, Ohio, Pennsylvania and Nevada, said Steven M. Marks, Sinclair’s chief operating officer.

“Those races in those markets are tailor made for us,” Marks said. “We’re very much looking forward to a robust political season in 2018.”

Smith said the company is continuing to work with the FCC and other governmental agencies and expects the Tribune acquisition to close early next year. The merger of the two broadcasters will cement Sinclair’s position as the nation’s largest TV station owner. Tribune stockholders approved the deal on Oct. 19.

The FCC last month extended its review timeline for the takeover to allow for more input from the public, setting Thursday as the new deadline to submit comments.

The deal could give Sinclair control of as many as 233 television stations that reach 72 percent of U.S. households, though Sinclair is expected to sell off some stations to appease regulatory concerns.

Approval has appeared likely because the FCC recently relaxed rules for broadcast station ownership, but opponents say the deal will hurt media competition and consumers. In its upcoming open commission meeting on Nov. 16, the FCC plans to review broadcast ownership rules to reflect the current media marketplace.

During the third quarter, Sinclair increased its share of revenues in markets where it operates, the company said, despite facing challenges such as the impact of hurricanes Harvey and Irma, the loss of some technical school advertisers and some one-time charges related to transactions.

The company made progress entering partnerships with multichannel video programming distributors to carry Sinclair’s signals, and renewed several Fox and CBS network affiliation agreements, Ripley said.

It also closed on a $240 million acquisition of Bonten Media Group Holdings, Inc., a deal that included affiliate Cunningham Broadcasting Corp.’s purchase of the membership interest of Esteem Broadcasting. The acquisition gave Sinclair 14 TV stations in eight markets.

In a report Wednesday, Wells Fargo Securities Senior Analyst Marci Ryvicker said it appeared that one-time factors caused Sinclair to miss earnings estimates but that core advertising has remained in line, “which we view as a positive.”

“We like [Sinclair’s] long-term focus, innovative distribution and content strategies,” Ryvicker said. “We also think that [Sinclair] is outperforming its peers on a core advertising basis.”

lorraine.mirabella@baltsun.com

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