Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Sinclair Broadcast Group (SBGI 2.44%) are up about 5% near the end of the trading day Wednesday after falling back from a rebound that turned an early 5% loss into an afternoon pop of more than 11%. Today's wild ride has been driven by a varied reaction to Sinclair's fourth-quarter earnings report, which sprinkled a bit of disappointment into otherwise strong results.
So what: Sinclair's quarterly revenue and adjusted earnings per share both surged on a year-over-year basis. Its $613.8 million top line represented a 44% improvement from 2013's fourth quarter, and $0.98 in adjusted EPS was a monster leap over the year-ago quarter's mere $0.02. Both results handily topped Wall Street's expectation for $599.5 million in revenue and $0.76 in EPS.
However, Sinclair's guidance for the first quarter of 2015 looks a bit soft by comparison, as the company expects to generate between $488.1 million and $492.3 million in revenue, a range that includes revenue from barter and income from other divisions, as well as Sinclair's core broadcast revenue (projected to range from $457 million to $461.2 million). Sinclair's guidance range falls slightly below Wall Street's first-quarter consensus estimate of $490.7 million in revenue at its midpoint.
Now what: In a lively conference call for today's earnings release, CEO David Smith said the exorbitant valuations given to fellow media companies Vice Media (valued at about $2.5 billion) and BuzzFeed (roughly $850 million) "aggravates the hell out of me." Sinclair's executives seem to believe their company's massive portfolio of local television stations somehow gives it a massive but unappreciated online platform as well. During the call, CFO Christopher Ripley actively pondered spinning off Sinclair's digital properties, which could explain why the company's shares suddenly reversed their slide.
I wouldn't buy into Sinclair because of its online offerings, but the company has grown rapidly and still sports a reasonable growth-stock P/E of just 24 after today's pop, which pairs nicely with a 2.5% dividend yield. Broadcast TV isn't going anywhere, and Sinclair's acquisitive hunger (it spent nearly $1.3 billion on purchases in 2014) is likely to help propel its fundamentals higher over the coming years.
