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Sinclair Broadcast beats revenue estimates but posts big loss in second quarter

Sinclair Broadcast Group reported a 26% jump in revenue for its second quarter Wednesday, beating Wall Street estimates, as advertising rebounded from the pandemic.

Revenue for the three months ended June 30 increased to $1.61 billion, compared with $1.28 billion in the second quarter of 2020, Hunt Valley-based Sinclair said. The results beat analysts revenue consensus of $1.59 billion.

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The broadcaster reported a loss of $332 million, or $4.41 per share, due to a sharp rise in production expenses related to sports broadcasting. That compares with a profit of $252 million, or $3.12 per share, in 2020′s second quarter.

Chris Ripley, Sinclair’s president and CEO, called those results “solid,” noting the company outperformed expectations amid a continued recovery in the advertising market and ongoing cost control efforts as well as the timing of certain expenses.

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Total advertising revenues of $491 million increased 109% compared with $235 million in same period last year, driven by the general recovery of the advertising market from the pandemic. Additionally professional sports games that had not been played in the second quarter of 2020 resumed, also boosting advertising sales.

The gains were offset partially by the absence of political ads, as 2021 is a non-political year. Core advertising revenues, which exclude political revenues, jumped 125% to $486 million, also driven by pandemic recovery.

The TV station owner is making progress in areas such as planning a local sports streaming service expected to launch next year and enabling viewers to bet on sports programming in a partnership with Bally Sports, Ripley said.

Shares of Sinclair rose 4.1% to close Wednesday at $29.43 each.

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Tuna N. Amobi, an analyst with CFRA Research, lowered his rating on Sinclair stock to “hold” from “buy” and cut the 12-month target price to $30 a share.

He said the return of live sports and TV advertising recovery have been welcome developments amid the COVID-19 vaccine rollout.

But “we see potential challenges as [Sinclair] aims to achieve a coherent strategy for its broadcasting and regional sports (Bally) businesses, while it shoulders relatively high financial leverage and faces pay-TV carriage disputes that have increasingly resulted in prolonged channel takedowns.”

Ripley said the company believes Sinclair’s full value is not reflected in the current stock price and that assets separate from broadcasting and regional sports network businesses have appreciable value.

Those assets include warrants and options in Bally’s Corp. and tax benefits as a result of buying regional sports networks in 2019 from The Walt Disney Co. for $10.6 billion.

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