TEGNA (TGNA) Q3 Earnings Match Expectations, Revenues Up Y/Y

TEGNA (NYSE:TGNA) reported third-quarter 2019 non-GAAP earnings of 27 cents per share, which was in line with the Zacks Consensus Estimate. However, the figure declined 32.5% on a year-over-year basis.

TEGNA’s adjusted revenues were up 2.4% year over year to $551.9 million. The figure beat the consensus mark by 0.6%.

Excluding political advertising revenues, adjusted revenues increased 14% year over year.

Quarter in Detail

Advertising and Marketing services (53.9% of revenues) revenues were $297.3 million, up 12.3% on a year-over-year basis. Sluggishness in automotive advertisement was fully offset by growth in the services, banking and media categories.

Subscription (43.6% of revenues) revenues were $240.7 million, up 16% year over year, driven by higher rates and contributions from acquisitions.

Political (1.5% of revenues) revenues were $8.1 million, down 86.5% year over year. Other revenues (1% of revenues) were $5.7 million, down 9.5% year over year.

Non-GAAP adjusted EBITDA declined 13.5% year over year to $166.9 million. Adjusted EBITDA margin was 30.3%, contracting 560 basis points (bps) year over year.

Non-GAAP operating expenses (77% of revenues) were $425.1 million, up 13% year over year primarily due to increased programming fees.

Non-GAAP operating income slumped 50.4% year over year to $73.3 million. Operating margin was 13.3% compared with the year-ago quarter’s 27.4%.

Acquisition Details

On Aug 8, TEGNA announced that it has completed the acquisition of Dispatch Broadcast Group’s leading television stations WTHR and WBNS, and WBNS radio.

Moreover, on Sep 19, TEGNA announced that it has completed the acquisition of 11 local television stations from Nexstar Media Group (NASDAQ:NXST) .

Carriage Agreement Details

On Oct 5, TEGNA reached a multi-year carriage agreement with Spectrum. Moreover, on Oct 28, the company announced the renewal of a multi-year affiliation agreement with Fox (NASDAQ:FOXA) .

Balance Sheet & Cash Flow

As of Sep 30, 2019, total debt was $4.2 billion and net leverage was 4.9 times compared with total debt of $3 billion and net leverage of 4 times as of Jun 30, 2019.

On Sep 13, Tegna completed a $1.1-billion private placement offering of senior notes at a 5.0% interest rate, with net proceeds used in part to repay approximately $290 million of 5.125% notes, due July 2020, and borrowings under the revolving credit agreement. The company also extended and amended its $1.5-billion revolving credit facility through August 2024.

Free cash flow at the end of the third quarter was $105 million.

Guidance

For fourth-quarter 2019, TEGNA expects GAAP revenues to increase in the mid-single-digit range. Non-GAAP revenues (excluding political) are anticipated to grow in the high 20s range.

Total non-GAAP operating expenses are anticipated to increase in the mid-to-high 20s range. Excluding programming, operating expenses are expected to grow in the low-to-mid 20s range.

For 2019, TEGNA expects subscription revenues to increase in high teens on a year-over-year basis. Total capital expenditures are anticipated to be $82-$84 million.

Zacks Rank and Stocks to Consider

Currently, TEGNA has a Zacks Rank #1 (Strong Buy).

YETI Holdings (NYSE:YETI) is a similar-ranked stock worth considering in the broader consumer discretionary sector. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for YETI is pegged at 20%.

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