An Ugly Q2, And A Tough Q3, Scorch Sinclair

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Here’s the good news for Sinclair Broadcast Group: The owner of broadcast TV stations saw its revenue jump to $679.3 million, from $666.5 million, in Q1.


Unfortunately, the company’s total operating expenses surged to $560.4 million, from $537.5 million, leading to an operating income dip to $118.9 million, from $129.1 million.

In turn, Sinclair’s net income came in at $44.6 million (43 cents per share), compared to $49.4 million (52 cents) in Q2 2017.

Analysts polled by Thomson Financial projected earnings of 40 cents per share on revenue of $675.77 million.

Nevertheless, investors sold off Sinclair shares following the Q2 earnings report, sending SBGI shares down 5.3% to $34.85 minutes before Wednesday’s Closing Bell on Wall Street.

What ails Sinclair, given the respectable Q2?

Tough comps. As Sinclair looked ahead to Q3, President/CEO Chris Ripley (pictured) pointed to the absence of Olympics-related ad revenue and much lower political dollars as key impact factors in July, August and September.

Media revenues, before barter, are expected to be approximately $623.2 million-$629.8 million, down 0.9% to 1.9% year-over-year. This is due to advertising revenues received in 2016 related to the summer Olympic games and the Presidential election, Sinclair notes.

“Although we expect core advertising to be flattish in the third quarter due in part to the absence of $11 million in Olympic advertising revenues received in third quarter of 2016, adjusting for the for-profit technical schools that went out of business in 2016, core advertising would be flat to up low single digit percents,” Ripley said in prepared remarks. “Our digital business, excluding new digital investments, continues to outperform with mid to high 20% growth expected in the third quarter of 2017.”

On the cash flow front, Sinclair in July received approximately $311 million of gross proceeds from the FCC Spectrum Auction. This will be used toward the funding of its proposed acquisition of Tribune Media.


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