Sinclair Ends Challenging 2022 With Mixed Q4; Retrans Weakness Expected to Continue in 2023

Sinclair ended a taxing 2022 on a mixed note as fourth-quarter revenue missed and adjusted EBITDA beat FactSet consensus. While the firm benefited from strong political ad spending, retransmission revenue continues to disappoint, down 2% excluding Diamond Sports Group (DSG) due to higher subscriber churn. Management expects retrans revenue from the major broadcasters to decline again in 2023 due to 50% of big four coverage renewing in second-half 2023. Another 40% is up for renewal in first-half 2024. As a result, retrans growth will rebound in 2024 and 2025, leading to a three-year CAGR in the low single digits, slightly below the previous guidance of mid- to low-single-digit expansion. We plan to slightly lower our $26 fair value estimate after updating our model to account for lower retrans revenue expectations.