Sinclair Broacast Group anticipates more acquisitions

The relaxation of federal broadcast ownership rules should pave the way more acquisitions by Sinclair Broadcast Group, company officials said Wednesday as they discussed first-quarter financial results that topped Wall Street expectations.

"There are going to be many more opportunities to come," Chris Ripley, Sinclair's president and CEO, said during a conference call with analysts. "We think it's a buyers' market."

Hunt Valley-based Sinclair, which owns or operates 173 television stations, announced plans last month last month to buy New York-based Bonten Media Group, owner of 14 TV stations in eight markets, for $240 million. Sinclair reportedly has been pursuing an acquisition of Tribune Media, owner of more than 40 TV stations, though the company has not commented since talk of a potential deal surfaced in March and declined again to comment Wednesday.

Earlier this week, reports emerged that 21st Century Fox, owner of Fox News, and private equity firm Blackstone also are in talks to buy Tribune, raising the prospect of a bidding war. Tribune Media spun off its newspapers, including The Baltimore Sun, in 2014, but continues to own the building that house The Sun's offices in Mount Vernon.

On Wednesday, Sinclair reported income of $57.2 million, or 61 cents per share, for the three months that ended March 31, up from $24.1 million, or 25 cents per share, in last year's first quarter.

The results included a pre-tax gain of $53 million on Sinclair's sale of Alarm Funding Associates, a financing company for alarm installation and monitoring firms, for $200 million in March. Adjusted for the impact of that sale, Sinclair's earnings were 32 cents per share, beating analysts' estimates of 31 cents per share.

Sinclair's sales jumped 12.3 percent to $649.9 million in the January-to-March period, topping Wall Street expectations by about $4 million.

Shares of Sinclair fell as much as 5 percent early Wednesday, possibly reflecting a revenue decline of less than 1 percent in core advertising categories, but the loss was pared back later in the day and the stock closed off a $1 at $37.35 a share.

"Core advertising is always going to be the primary revenue driver," for broadcasters, said Tuna Amobi, an equity analyst at CFRA Research who maintained a "buy" recommendation on the stock. "They are still in a decent place based on year-to-date performance."

And, he said, the company is well positioned to benefit from industry consolidation.

Steven Marks, COO of Sinclair's television group, said the advertising decline was driven partly by the loss of technical school advertisers that went out of business. Core ad revenue would have been flat otherwise, he said. It is expected to be flat in the second quarter as well.

"Two categories are holding us back, retail and food," said Marks, adding that he expects improvement in the second half of the year as consumers become more comfortable that some relief will come through health care reform and new tax codes. "We think those categories will rebound."

Sinclair said it is seeing growth in the automotive sector, its largest ad category. Revenue from digital business, still a relatively small part of the the business, jumped 25 percent as the company has added more video and social media tie-in features.

Sinclair's Bonten announcement in April came amid the reports about its interest in Tribune Media and a day after the Federal Communications Commission voted to allow stations broadcasting on higher-frequency UHF airwaves to count only half their audience against a cap allowing a single company to own stations reaching no more than 39 percent of the nation's television households.

Those changes are expected to spur consolidation in the television industry as traditional media outlets seek ways to better compete with online platforms and cable providers.

On Tuesday, Sinclair announced plans to launch new children's programming starting July 1. KidsClick will air daily on broadcast television, online pay TV and mobile devices, and be available in 75 million TV homes through Sinclair-owned stations and national network partner ThisTV.

Marks said the initiative gets Sinclair back into a $1 billion children's business that's dominated by Cartoon Network and Nickelodeon.

"We like [Sinclair's] longterm focus, innovative distribution and content strategies," said Marci Ryvicker, a senior analyst for Wells Fargo Securities, in a report.

lorraine.mirabella@baltsun.com

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