“Nexstar’s results continue to benefit from our diverse, scaled, efficient and low leverage business model.”
That’s what the founder of the single-largest owner of broadcast television stations, The CW Network, the NewsNation cable TV network and WGN-AM in Chicago said ahead of the third quarter 2022 earnings call for the company he founded nearly three decades ago.
“Nexstar delivered another quarter of record financial results,” Perry Sook said of Nexstar Media Group’s Q3 2022 results. But, did Nexstar meet analyst expectations?
Eight Wall Street analysts track Nexstar, and the consensus revenue estimate range was $1.27 billion-$1.3 billion.
The actual result was $1,269,100,000, just making the low end of the analysts’ forecasts, and it improved from $1.157 billion in Q3 2021.
Net income attributable to Nexstar Media Group climbed to $288.7 million ($7.30 per diluted share), from $169.6 million ($3.90). This easily surpassed the Yahoo! Finance consensus estimate of $5.41 and Zacks consensus estimate of $5.50.
On an adjusted basis, net income came in at $287.5 million, rising from $169.1 million, as Adjusted EBITDA increased to $488.8 million from $410.5 million.
As the earnings call began, Sook shared with analysts and investors how an “all-time high” net revenue and “record results and excellent shareholder returns” set Nexstar apart from its peers.
Nexstar’s total net political revenue in the third quarter came in at $129.3 million, pushing the full-year total to a half-billion dollars. It’s up 28% pro-forma from Q3 2018, Sook shared on the earnings call.
“Local television remains the medium of choice for candidates to reach voters at scale,” Sook said.
Overall, Q3 2022 net revenue rose 9.7%, led by political advertising, distribution, and digital revenue increases. Strong political ad trends will help fuel revenue in Q4 for Nexstar, Sook added, as 2023 will see distribution revenue upside from renewals of agreements representing more than half of Nexstar’s subscribers.
Sook is already looking ahead to 2024, when Nexstar expects to benefit from “another record year for political advertising due to the presidential election,” combined with
the benefit of another wave of distribution agreement renewals for approximately 40% of Nexstar’s retransmission consent partners.
Then, there’s Nexstar’s large-scale overhaul of The CW Network, which it now has 75% ownership of; growing NewsNation, which has seen slow growth with Chris Cuomo in prime-time; and the pending monetization of Nexstar’s NEXTGEN TV stations, including Broadcast Internet opportunities.
CORE AD DISPLACEMENT
While political advertising drove Q3 2022 revenue for Nexstar, a weaker national advertising market — a story shared by audio content creation and distribution company Beasley Media Group on November 7 in its Q3 ’22 earnings call — also impacted Nexstar. In Q3, core TV advertising revenue fell 7.6% from one year ago, to $399.7 million.
Yes, political ad displacement was a factor. But, so was the absence of the Olympics in the quarter versus last year. An increasing interest rate environment doesn’t help either, Sook noted.
Auto, drugs, attorneys and entertainment were key categories for growth, with a mid-single-digit percentage increase for Automotive a pleasant result for Nexstar in Q3, Chief Operating Officer Tom Carter said. In contrast, sports betting and gaming declined in mid-single-digit millions due to reduced spending in more established markets and redirection of ad dollars to election advertising for California propositions that could legalize tribal sports wagering and online sports betting, respectively.
Just shy one one hour into Tuesday’s trading, NXST was trading on the Nasdaq up 4.6% to $162.14. A glance at Calls for December 16 show the highest volume at a strike price of $180, with puts at $150. This suggests a slow, steady climb back toward $200 for NXST over the next several weeks.
