By:
Kat Christian, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by myself,
and it expresses my own opinions. I am not receiving compensation for it and I
have no business relationship with any company whose stock is mentioned in this
article.
Summary:
• Nexstar Media Group Inc. (NASDAQ: NXST) provides broadcasting and
digital media services across the United States.
• NXST has paid a dividend
since 2013 and grown over 24% on a compound annual basis since. NXST increased
their quarterly dividend by 24.4% to reach $0.56 in January 2020.
• NXSP engaged in retransmission
consent agreements this quarter, representing 70% of subscribers and made
long-term affiliation contracts with CBS, FOX, and NBC.
• Management has
indicated that the acquisition of the Tribune Organization is expected to generate
more pro forma free cash flows of more than expected, increasing expectations
from $1.02 to $1.175 billion.
• The company experienced
double digit growth in all non-political revenue streams, due to the biennial
nature of their political revenues business.
• The company repurchased
$45.1 million of common shares throughout their fourth quarter.
Key
points:
Purchase
& Sale.
NXST announced
in November 2019 that they would be purchasing and divesting a number of affiliate
networks with FOX Corporation. They are purchasing
networks worth $45 million and divesting to FOX Corporation in the sum of $350
million. These purchases are expected to realize operating and financial synergies
for NXST in their North Carolina, South Carolina, and Virginia Markets. The
proceeds from the sale of networks is in the process of being used towards the
reduction of borrowings under a credit facility.
Horizons
Broadened.
2019 was a year
very busy for NXST, as they are almost fully finished integrating Tribune Media
into their operations, expecting to realize over $185 million in synergies, $25
million more than previously expected. This acquisition landed NXST the largest
U.S. television broadcast station group on the country, with both national coverage
and reach.
Summer News Launch.
Expected
to reach 75 million US households, News Nation, NXSP’s latest announcement, is
the WGN prime-time national newscast that comes along with a new, around-the-clock
news app. This news platform is set to use the expertise of 5,400 journalists
and 110 newsrooms in the country. The goal of the platform is to provide fact-based
information to viewers without any semblance of bias or opinion while also
generating advertising revenue.
What
has the stock done lately?
Since the beginning of
2020, NXST’s stock has decreased .03%, reacting much better to current economic
factors that the market in general. However, in more recent times, the company
announced earnings on February 26th, missing expected EPS by $0.95,
or -28.70%, but reaching record free cash flows, at $173.9 million. This is the
second time in the last four quarters that NXST had missed earnings. This miss
caused the stock to fall in conjunction with the effects of corona virus, approximately
10.43%.
Past
Year Performance:
NXST has increased 20.41% in value over
the past year, but regardless, the stock is trading at a bargain due to current
global economic factors. With the progress
of their acquisition, the synergies they have been realizing, and the progress
they are expected to make, the company’s valuation is seen as low in comparison
to its historical average and future potential.
Source:
FactSet
My
Takeaway
MXST missing earnings was
as setback for the company and stock, but in general the company has just released
new and improved expectations, higher expected synergies from their
acquisition, and a new product that will reach 75 million U.S. households. The
company is poised for more growth looking into 2020. Management is confident in
the abilities of the pro forma operating company and the expertise it has, not
only in select markets but across the country.
Source:
FactSet
