Sinclair cautious after Q2 slowed down


Sinclair Broadcast Group had a decent Q2, with revenues up slightly and a better jump in operating cash flow. But business slowed down in the quarter, amid the economic uncertainty, so the company is being conservative with its Q3 outlook.

“Despite the economic concerns still plaguing the country, we continue to be on track to grow our 2011 net broadcast revenues excluding political,” said CFO David Amy. “Leading that growth expectation is auto ad spending and retransmission revenues. We look forward to the start of the Fall season with Fox’s highly anticipated new show, ‘The X Factor,’ ABC’s returning hit, ‘Dancing with the Stars,’ and a strike-averted NFL season,” he noted.

For Q3, Sinclair is projecting that core revenues, excluding political, will be somewhere around flat – from down 0.7% to up 0.6%. Including political, net revenues are expected to be in a range of $150.6-152.6 million. That would be a drop of 3.9-5.2%. Of course, political was big last year, so Sinclair is expecting only $2.6 million in political ad spending in the current quarter, compared to $9.8 million in Q3 of 2010.

Sinclair’s stock price dropped after the company issued that projection. At Wells Fargo Securities, analyst Marci Ryvicker said “it sounds like guidance may be a little conservative given that auto is doing well and should come back strong; political is pacing above budget; and cancellation in general are running lower.”

As for Q2, net broadcast revenues were up 0.3% to $159.3 million – a bit below the 1% gain that had been expected.  Local was up 5% and national down 12.8%. Excluding political, local was up 5.3% and national down 7.8% for the quarter. Operating income gained $1.6 million to $57.6 million in Q2.