Sinclair Broadcast Group said Wednesday its longtime CEO will step back from the company's day-to-day operation, in a reshuffling of the executive suite designed to position the broadcaster to weather changes in the industry.
The news came as Hunt Valley-based Sinclair reported a profit of $50.8 million in the third quarter, up about 17 percent from the same period in 2015. The firm's revenue increased more than 26 percent to $693.8 million, versus $548.4 million a year earlier.
The firm earned 54 cents per share in the quarter ended Sept. 30, up from 45 cents last year.
But the gain was not as strong as many had anticipated during a presidential election year, performance Sinclair leaders attributed to limited television spending for Republican nominee Donald Trump, as well as increased competition from NBC affiliates for ads during the Olympics.
The firm's stock closed at $24.85, down 18 cents, in Wednesday trading.
Analysts said the firm's stock price already reflects the reduced revenue, having dropped after the company told investors in September that it would not reach the $649.2 million-plus predicted in August.
But many analysts are worried about how local broadcasters will be affected by the shake-up in the advertising world wrought by the growth of digital platforms such as Google and Facebook. Sinclair, which owns, operates or provides services to 173 television stations in 81 markets, including some pending transactions, is one of the leading players in that space.
"Certainly from investors you get questions about the sustainability of earnings, how is their core business doing, is it under some secular threat?" said James Dix, a senior analyst at Wedbush Securities. "I think some of the concern is warranted."
Sinclair CEO David D. Smith, whose father founded the company, acknowledged the changes facing the industry in explaining the reorganization, saying they are designed to help the firm grow in a "changing media landscape."
Smith, who has served as chairman, president and CEO for more than 20 years, will become executive chairman, effective Jan. 1, focusing on a new broadcast platform, public policy and expansion of Sinclair's news franchise.
"The organizational changes provide greater focus and oversight in those critical areas that strengthen our longer term strategies to be multi-platformed, vertically integrated and compete in the broader media ecosystem, ultimately driving value," he said in a statement.
Sinclair's Chief Financial Officer Christopher Ripley — who will become CEO and president — said 2016 has been an unusual year, with a unique election and pressure on advertisers such as for-profit colleges.
"When we project forward into 2017, we don't think that the market has really changed," he told analysts during a call Wednesday.
At the same time, Sinclair pointed to a 25 percent increase in digital revenue this quarter, as well as an online site, Circa, which it hopes will break even in 2018. (Circa, which went live this summer, is responsible for a roughly $10 million loss this year, Ripley said.)
The firm also has invested in live sports through the Tennis Channel and is using drones to aid its news coverage, among its other investments
Daniel Kurnos, a senior equity analyst at the Benchmark Co., said the company is well positioned.
"One of the reasons Sinclair has been our favorite long-term play in the space … is because they've pursued an aggressive diversification strategy that should yield dividends," said Kurnos, adding that he expects television to remain a big player in advertising.
Sinclair also said Lucy Rutishauser, its senior vice president of corporate finance and treasurer, would take on the title of chief financial officer.
Despite the change in Smith's title, analysts said they expect him to remain involved, noting that day-to-day operations have long been a "group effort." He and his family remain Sinclair's controlling shareholders.
"I still believe he will be firmly involved in the vision," Kurnos said.