TEGNA (TGNA) Down 2.6% Since Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for TEGNA Inc. (NYSE:TGNA) . Shares have lost about 2.6% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is TGNA due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

TEGNA reported first-quarter 2018 non-GAAP earnings of 33 cents per share, which surpassed the Zacks Consensus Estimate by 3 cents. The figure increased 32% on a year-over-year basis and 3.1% sequentially.

On a GAAP basis, revenues increased 9.4% year over year and 2.4% on a sequential basis to $502.1 million, which came ahead of the Zacks Consensus Estimate of $496.4 million. The top-line growth was driven by continued increase in total paid subscribers, strong performance of TEGNA stations, improved advertising and political revenues.

Additionally, TEGNA reported adjusted revenues of $470.4 million, which excludes the impact of Olympics, Super Bowl and political revenues. The figure also reflects year-over-year growth of 5.5%.

Top Line in Detail

TEGNA reports revenues in four categories.

Advertising and Marketing Services: The company generated $282.9 million of revenues from this category, which was up 5.2% on a year-over-year basis but down 4.6% sequentially. The year-over-year growth was driven by strong Olympics and Super Bowl advertising revenues, which came in $50 million out of which $38 million was contributed by Olympics and $12 million was contributed by Super Bowl. Further, NBC stations gained traction for Olympic event and this remained positive for the top-line growth.

Subscription: This category generated $205.6 million revenues in the reported quarter, up 12.8% and 15.2% from the year-ago quarter and on a sequential basis, respectively. This was driven by increasing paid up subscribers of both MVPD and new virtual MVPD services. Moreover, subscribers from OTT streaming services increased in first quarter.

Political: This category generated $7.6 million of revenues, which increased 245.5% from the year-ago quarter but decreased 23.3% sequentially. The year-over-year growth was driven by growing presence in political advertising sector.

Other: TEGNA generated $5.9 million of revenues from this category, which were up 5.3% year over year as well as sequentially.

Operating Details

Per the company report, operating expenses in first quarter were $365.1 million, up 8.7% year over year due to increasing cost for Olympics and Super Bowl, programming fees and growing investments.

Operating margin came in 27.3%, which expanded 50 basis points (bps) from the year-ago quarter.

Further, adjusted EBITDA was $157.3 million, which grew 8% year over year.

Balance Sheet & Cash Flows

As of Mar 31, 2018, total cash was $8.3 million, which decreased from $98.8 million as of Dec 31, 2017. Also, long-term debt outstanding was $3.2 billion compared to $3 billion in the last quarter. This increase was due to funding of KFMB acquisition through cash in hand and revolver.

In the first quarter, TEGNA generated $51.2 million of cash from operations compared with $139.9 million in the prior-year quarter. Free cash flow was $40.5 million compared with $121 million in the year-ago period.

Guidance

For second-quarter 2018, TEGNA expects subscription and political revenues to drive total revenues on a GAAP basis, which is anticipated to reflect a year-over-year increase by mid-single digit.

For 2018, the company raised subscription revenue guidance and expects it to be up in mid-teens.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower.

TEGNA Inc. Price and Consensus

VGM Scores

Currently, TGNA has a poor Growth Score of F, however its Momentum is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, TGNA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.