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Sinclair boosts revenue with expanded digital offerings, political advertising

Sinclair Broadcast Group Inc. boosted profits and revenue during the second quarter as it expanded its digital offerings and benefited from political advertising.

The Hunt Valley-based broadcaster also announced it has reached a multiyear agreement with Comcast Cable, the largest cable provider in the country, in which Comcast will pay an undisclosed fee to Sinclair to include its broadcast television stations in the cable lineup.

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"We are pleased with the value received, which reflects the importance of our programming to Comcast subscribers," said Barry Faber, Sinclair's executive vice president and general counsel, in the announcement.

Sinclair reported net income of $49.4 million, or 52 cents per share, in the three months ended June 30, compared with $45.8 million, or 48 cents per share, in the second quarter of last year.

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Total revenue jumped more than 20 percent, to $666.5 million, from $554.2 million a year earlier, sending Sinclair's shares up 6 percent to close at $29.09 each.

"We remain confident that we will continue to see robust political advertising as the second-quarter 2016 results were at the high end of our guidance range," said David Amy, Sinclair's executive vice president and COO, in the announcement.

The company expects a record year for political ads, with much of the political spending coming in the fourth quarter, "given the minimal spending to date by the Trump campaign and his late start in fundraising," Amy said.

"We like [Sinclair's] long-term focus, innovative distribution and content strategies, and inexpensive valuation," said Marci Ryvicker, a senior analyst at Wells Fargo Securities, in a report, noting the importance of the Comcast renewal agreement that will bring expanded carriage of Sinclair-owned Tennis Channel starting later this year.

She and Tuna Amobi, equity analyst at S&P Global Market Intelligence, kept buy ratings on the stock based on the results. Amobi maintained a "strong buy" based on upside from the Tennis Channel expansion and newer digital offerings.

During a call with analysts, the company addressed a question about whether it planned to pursue additional acquisitions of cable channels beyond the Tennis Channel. The Wall Street Journal reported Tuesday that Sinclair is interested in acquiring The Weather Channel's TV operations in a deal that could be valued at $100 million, far less than the $3.5 billion paid for the channel in 2008 by current owners Bain Capital LLC, Blackstone Group LP and NBCUniversal, a unit of Comcast Corp. Sinclair has not responded to that report.

"We will look at everything that comes across our table, if you will, and search everything out," said Chris Ripley, Sinclair's CFO, during the call.

He added that a prospective acquisition would need to have unique characteristics that would allow Sinclair to increase distribution. The Weather Channel's distribution is fairly widespread.

During the second quarter, the company paid a previously disclosed, one-time settlement of $9.3 million to the Federal Communications Commission, which reduced earnings by 9 cents per share.

"As the leading television broadcaster, we continue to deliver financially and operationally," said David Smith, Sinclair president and CEO, in the company's announcement. "Not only did we exceed our expectations for our key financial metrics during the second quarter, but we also have made significant progress in expanding distribution and content."

The company launched Circa, a news and entertainment website aimed at a young generation, which drew more than seven million video views in its first week, Smith said.

Sinclair, the largest local news producer in the country, also agreed to renew its affiliation agreements with Fox stations. Under the agreement, Sinclair renewed Fox affiliations in five markets that expired Dec. 31 and five markets that expired June 30, through the end of 2019.

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The broadcaster benefited from political ad revenue and expansion of its digital offerings. Revenue from political ads rose to $16.7 million from $4 million in the second quarter of last year. Advertising revenue without political ads rose 1 percent.

Sinclair expects to see $8 million in incremental revenue from its NBC affiliates from the summer Olympics that start Friday.

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