Multimedia Scripps is a company going in two directions at once. Its television properties are poised for big gains in 2014 while its newspaper assets face the danger of further reversals. All in all, Moody’s sees a stable company.
The service has been assigned a Corporate Family Rating of Ba2 to go along with its stable rating, based in part on its modestly high 3.2x leverage level and the company’s in-family operators who pay attention to such things.
According to Moody’s, television accounts for more than half of the company’s revenue, and more importantly, 80% of its EBITDA. During this off-political year, Moody’s believes EWS is looking at an overall revenue decline in the 9%-11% range.
The differences in the prospects for the two segments during 2014 are stark. TV is expected to earn significant increases in core advertising revenue, and that positive will only be heightened by even-year political income.
There are some inherent weaknesses in the TV group. In terms of affiliations, it is heavily weighted toward ABC, and in most cases the stations rank #3 or lower in their DMA.
However, they tend to be #1 or #2 when it comes to local news, and are nicely dispersed throughout 13 DMAs in markets ranked #40 or larger.
Moody’s anticipates that 2014 gains on the television side will be accompanied by further setbacks on the print side and anticipates belt-tightening to mitigate the negatives inherent to the modern print business.
Moody’s analyst Carl Salas set a positive and a negative benchmark for EWS. If it allows leverage to bloat past 3.75x, it may be looking at a status downgrade. On the flip side, EWS would have to overcome Moody’s concerns associated with the newspaper business in general and its heavy concentration of ABC stations in particular, but if it can do that and get its leverage “comfortably below” 3.0x, it could be in line for an upgrade.
