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Why Sinclair Broadcast Stock Fell Wednesday

By Daniel Sparks - Feb 26, 2020 at 4:03PM

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A sharp drop in net income may have spooked some investors.

What happened

Shares of television broadcasting company Sinclair Broadcast Group (SBGI -1.08%) fell sharply on Wednesday, declining as much as 16.6%. As of 3:15 p.m. EST, the stock was down about 15.3%.

The stock's decline follows Sinclair's fourth-quarter results, which conclude a transformational year for the company. In 2019, Sinclair acquired 21 regional sports networks from Walt Disney (DIS -1.38%).

A sharp decline in profits, however, may have disappointed some investors.

A chalkboard sketch of a chart showing a stock price declining

Image source: Getty Images.

So what

Sinclair's fourth-quarter revenue jumped 82% year over year to $1.6 billion. This was attributable to Sinclair's recently acquired assets. But political revenue was down from $150 million in the fourth quarter of 2018 to $23 million in the fourth quarter of 2019. This tough comparison is due to 2018 being an election year.

A sharp decline in political revenue weighed on profitability. Net income in the fourth quarter of 2018 was $44 million, down from $206 million in the year-ago period.

Now what

Sinclair guided for first-quarter revenue between $1.647 billion and $1.675 billion. This compares to an analyst estimate for revenue of $1.66 billion.

Management is optimistic about Sinclair's opportunities.

"As the owner of the largest group of regional sports networks (RSNs) and a leading provider of local news, Sinclair is well-positioned to capitalize on the most desirable segments of the broadcast and media industry -- live local content that resonates with viewers," said Sinclair CEO Chris Ripley in the company's fourth-quarter earnings release. Ripley also said the company will focus on growing its share of "what is believed to be unprecedented political advertising spending" in 2020.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short April 2020 $135 calls on Walt Disney. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Sinclair Broadcast Group, Inc. Stock Quote
Sinclair Broadcast Group, Inc.
$22.98 (-1.08%) $0.25
The Walt Disney Company Stock Quote
The Walt Disney Company
$106.63 (-1.38%) $-1.49

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