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TEGNA Inc. (TGNA) Down 8.6% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for TEGNA Inc. (TGNA). Shares have lost about 8.6% in that time frame, underperforming the S&P 500.

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

TEGNA Q4 Earnings Beat Estimates, Revenues Rise Y/Y

TEGNA’s fourth-quarter 2022 non-GAAP earnings of 98 cents per share beat the Zacks Consensus Estimate by 8.89% and increased 71.9% on a year-over-year basis.

Revenues increased 18.4% year over year to $917.1 million but missed the consensus mark by 1.17%. The year-over-year growth was driven by strong growth in political revenues, despite a decline in advertising and marketing services revenues, resulting from political displacement and macroeconomic headwinds.

Notably, in February, Tegna entered into a definitive agreement to be acquired by an affiliate of Standard General for $24 per share in cash and become a private company. The transaction, which was unanimously approved by the Tegna Board, has an equity value of around $5.4 billion and an enterprise value of $8.6 billion, including the assumption of debt.

On Nov 18, TEGNA announced that Standard General’s acquisition of Tegna received approval from Team Telecom which submitted a filing with the Federal Communications Commission (FCC) confirming it has no objections to the transaction.

However, recently, the FCC put off consideration of the proposed purchase raising concerns that the transaction might trigger price increases for consumers as TV stations boost charges for cable providers. The deal might also reduce local content on TV stations.

Quarter in Detail

Subscription (40.6% of revenues) revenues increased 10.8% year over year to $372.3 million, driven by rate increases and partially offset by subscriber declines. TEGNA has renewed retransmission consent agreements representing approximately 30% of its subscribers since prior quarter.

Advertising and Marketing services (38.5% of revenues) revenues decreased 11.8% year over year to $352.9 million due to displacement because of strong political revenues, continued macroeconomic headwinds and reduced sports betting advertising with fewer new market launches from the prior year. Automotive advertising revenues rebounded in the quarter with strong year-over-year growth.

Political (19.6% of revenues) revenues were $179.4 million, up from $26.6 million reported in the year-ago quarter.

Other revenues (1.4% of revenues) were $12.5 million, up 4.1% year over year.

Non-GAAP adjusted EBITDA increased 47.1% year over year to $360.7 million. Adjusted EBITDA margin expanded 770 basis points (bps) from the year-ago period to 39.3%.

Non-GAAP operating expenses (64% of revenues) of $586.5 million were up 4.5% year over year, with the increases predominantly driven by investments in Premion’s growth and programing costs.

Non-GAAP operating income increased 55% year over year to $330.6 million. The operating margin expanded 850 bps from the year-ago period to 36%.

Balance Sheet & Cash Flow

As of Dec 31, 2022, total cash was $551.7 million compared with $377 million as of Sep 30, 2022.

Total debt was $3.09 billion and net leverage was 2.7 times as of Dec 31, 2022.

Free cash flow in the fourth quarter was $297.1 million compared with $148.4 million reported in the previous quarter.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

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