On its surface, one might wonder why Nexstar Media Group‘s fourth quarter 2022 revenue report shows a year-over-year net income dip. The answer: One year ago it did not own The CW Network.
Subtract out the network, which is in the midst of a wholesale retooling of its prime-time lineup under Nexstar leadership, and Nexstar’s tale is one of the industry’s strongest.
Net income, ex-The CW, rose to $272.4 million from $262.2 million.
And, like many broadcast media brethren in Q4, Nexstar took a non-cash impairment charge: for the broadcast TV station, NewsNation and WGN Radio parent, it was a $132.9 million line item.
Another key expense: A $28.7 million payment for broadcast rights.
Throw it all together, and include The CW’s $94.3 million net loss in Q4 ’22, and Nexstar’s adjusted EBITDA on a consolidated basis rose to $598.2 million from $499.3 million.
Did investors digest this story? At 10am, NXST was priced at $185.60, down 3.5%. Perhaps they are digesting whether or not Nexstar met Wall Street analysts’ consensus estimates.
The company did not.
Overall, consolidated net revenue climbed to $1.487 billion from $1.246 billion. Of the nine analysts polled by Yahoo! Finance, the average revenue estimate was $1.5 billion, with $1.44 billion on the low end and $1.55 billion on the high end.
Because of The CW, net income dipped to $178.1 million ($5.30 per diluted share) from $262.2 million ($6.19). That was a much bigger miss, as eight analysts polled by Yahoo! pegged Nexstar’s EPS to fall between $6.67 and $8.26.
With a forward yield of 5.4 and a PE ratio of 7.71, Nexstar is one of the mightiest of media companies publicly trading in the U.S. financial markets, and with major shifts underway at The CW, the long-term gains could be strong for the company. Still, Argus on February 22 lowered NXST’s target price to $206, while Simply Wall St., the popular investor blog, asked on Monday if “there is now an opportunity in Nexstar.”
In particular, Simply Wall St. wonders of Nexstar, “could the stock still be trading at a relatively cheap price?” Its answer: yes, when one compares the company’s price-to-earnings ratio to the industry average.
“Nexstar Media Group’s ratio of 6.99x is below its peer average of 14.87x, which indicates the stock is trading at a lower price compared to the Media industry,” Simply Wall St. says.
However, stock volatility may suggest an investment in Nexstar on a look-and-see basis.
‘A MONUMENTAL YEAR FOR NEXSTAR’
In prepared comments ahead of the company’s earnings call, Nexstar Chairman/CEO and company founder Perry Sook expressed optimism for what lies ahead, based on the growth of the company across last year. He called 2022 “ a monumental year for Nexstar,” adding, “Our strong financial results are a referendum on the power of the broadcast model and its ability to deliver audiences at scale and strong levels of free cash flow.”
“Our strong financial results are a referendum on the power of the broadcast model and its ability to deliver audiences at scale and strong levels of free cash flow.” — Perry Sook
Looking ahead, Sook said Nexstar will benefit in 2023 from the 2022 renegotiation of distribution contracts representing more than half of Nexstar’s subscribers.
“For the 2023/2024 cycle, we expect to generate pro forma average annual attributable free cash flow of approximately $1.25 billion, inclusive of $90 million of attributable losses and associated tax benefit from The CW,” he said.
This was the lone guidance Nexstar offered ahead of its earnings call, with no visibility for Q1 2023 presented in prepared comments.
