Sinclair Broadcast Group boosted revenue in the first quarter of 2019 thanks to strength in its digital and distribution businesses, but missed Wall Street’s earnings estimates.
Sales at the Hunt Valley-based broadcaster grew nearly 8.5% to $722.1 million, compared with $665.4 million in the first quarter of 2018, the company reported Wednesday.
The growth was driven by increased revenue in digital channels and higher distribution revenue, a part of the business sheltered from advertising volatility that includes retransmission fees — the fees cable and satellite TV providers pay Sinclair to include its stations in channel lineups — affiliate fees and subscriptions revenue.
Income for the three months that ended March 31 fell to $21.7 million, or 23 cents per share, compared with $43.1 million, or 42 cents per share, in the same quarter a year earlier.
Earnings were 31 cents per share on an adjusted basis. That came in well below expectations among analysts for 39 cents a share, according to Zacks Investment Research. But the company surpassed Wall Street’s expected revenue of $709 million.
Sinclair’s stock ended the day down 2 cents at $60.93 a share.
Sinclair had announced Friday it will partner with the owner of The Weather Channel to buy 21 regional sports networks and Fox College Sports from The Walt Disney Co. in a $10.6 billion deal. The company’s stock had jumped nearly 35 percent Monday as investors cheered a deal expected to make Sinclair the nation’s largest owner of regional sports networks, double its revenue and enable it to attract even more viewers thanks to the growth of streaming services and legalized sports betting.
Sinclair is poised for growth thanks to the sports network deal and a Sinclair-backed industry shift to a “next generation” broadcast transmission standard that will enable mobile TV, personalized advertising and other services, said Chris Ripley, Sinclair’s president and CEO in an announcement Wednesday.
“We are transforming the company, diversifying our content sources and revenue mix and building a leading local news and sports organization on all platforms,” Ripley said.
During a conference call with analysts, Ripley said the company and other broadcasters are making strides in deploying the new broadcast transmission standard, known as ATSC 3.0, or Advanced Television Systems Committee. He said he expects the standard will be launched in 20 to 30 markets this year.
An analyst with CFRA retained a buy rating on Sinclair’s stock and raised his 12-month target price by $5 to $70, noting the transformative nature of the planned sports network acquisition.
In addition, Sinclair “seems on track to deploy ATSC 3.0 (new broadcast standard) starting in '19 and reaffirmed its planned February 2020 debut of its Marquee Sports Network (a joint venture with the Chicago Cubs),” analyst Tuna N. Amobi said in a report.
Through a joint venture announced in January, Sinclair and South Korean wireless communications firm SK Telecom are developing broadcasting services for the 3.0 standard, such as personalized advertisements, in-vehicle TV broadcasting and two-way communications between broadcasters and users’ smartphones, vehicles and TVs by recognizing personal IP addresses.
During the first quarter, the company launched its free, multi-channel streaming service, STIRR, which is “exceeding initial expectations,” Ripley said. Also during the quarter, Sinclair announced venture with the Cubs.
Sinclair’s first-quarter political advertising revenues fell to $2 million, compared with $7 million in the first quarter of 2018, which was an election year, the company said. Revenues from digital businesses grew 10 percent.
The broadcaster’s top three advertising categories — automotive, services and retail, — all are showing gains in the current quarter, said Steve Marks, Sinclair Television Group’s chief operating officer. And with the approaching presidential election, next year is expected to be unprecedented in terms of political advertising revenue, he said during Wednesday’s conference call.