Company Reports

Sinclair ended 2023 on a sour note. While results met the low end of our expectations and key metrics trended up in the quarter, the litigation settlement with Diamond Sports Group resulted in negative EBITDA and net income. The settlement shouldn’t affect future operating results, but we also don’t think the positive underlying trends will continue. Nonetheless, Sinclair should greatly benefit from record political spending in 2024. We are lowering our fair value estimate to $12 from $13 for no-moat Sinclair to reflect slightly slower growth expectations.

We expect that industry headwinds faced by linear television and the continued transition of advertising to digital mediums will result in ongoing challenges for Sinclair that lead its business to decline.

Sinclair announced the resolution of claims by Diamond Sports Group against Sinclair as a part of DSG’s bankruptcy and reorganization. In July 2023, DSG filed suit against Sinclair seeking $1.5 billion for alleged misappropriation of funds from Diamond prior to its bankruptcy filing. Sinclair has now agreed to pay DSG $495 million in cash, which will result in an estimated post-tax net cost to Sinclair of $250 million-$325 million. We previously believed DSG would provide no value for Sinclair, but we also didn’t expect Sinclair would be forced into this large a settlement. We are reducing our fair value estimate to $13 from $15.

Sinclair Broadcast Group is the second-largest television station operator in the United States, with 185 stations in 86 markets. Sinclair also owns 90% of Diamond Sports, formerly the Fox regional sports network group, which has filed for bankruptcy protection and likely holds no value for Sinclair shareholders.

While revenue and profitability exceeded management expectations, Sinclair’s third-quarter earnings continued to display a middling core business. In the absence of election-year political ad spending, total revenue fell 9% to $767 million year over year. Excluding political ads, revenue was flat versus a year ago, as a 3% decrease in distribution revenue offset a 1% increase in core advertising sales. Although uncertainty remains surrounding affiliation renewals, the short-term economic headwinds that have made advertisers hesitant to spend have started to subside. This stabilization provides some positive news, as 2024 is expected to bring record-breaking political ad spending. We are maintaining our $15 fair value estimate.

Sinclair Broadcast Group is the second-largest television station operator in the United States, with 185 stations in 86 markets. Sinclair also owns 90% of Diamond Sports, formerly the Fox regional sports network group, which has filed for bankruptcy protection and likely holds no value for Sinclair shareholders.

Sinclair posted a decent second quarter as the revenue came in at the high end and adjusted EBITDA slightly beat the top end of the guidance range. However, total revenue excluding political advertising fell by 3% versus a year ago due to mid-single-digit subscriber churn and ongoing ad weakness. We expect retransmission renewals and even-year political revenue to assist in counteracting subscriber churn, producing low-single-digit revenue growth over the next five years. We are maintaining our no-moat rating and $22 fair value estimate.

Sinclair posted an in-line start to 2021 as first-quarter revenue met and adjusted EBITDA beat FactSet consensus projections. Core advertising revenue weakness continued, dropping 2% year over year, excluding Diamond Sports Group. Uncertain economic conditions produced weak insurance ad spending that more than offset increased automotive ad spending. April saw the return of Sinclai's ABC and CBS stations to Hulu and FuboTV, respectively, ending customer blackouts. We expect future negotiations with distributors will remain difficult as sports leagues explore direct to consumer options. We are maintaining our $22 fair value estimate.

As expected, Diamond Sports Group, the owner of 19 regional sport networks, declared bankruptcy on March 15, less than one month after not making a $140 million interest payment on its debt. DSG, an unconsolidated subsidiary of Sinclair, despite Sinclair owning most of the equity, has agreed to a restructuring plan with its creditors that will transfer ownership of the firm to its creditors, wiping out Sinclair's equity in exchange for removing $8 billion in debt. While the deal has not been approved by all parties or the court, we view approval as likely given that Sinclair and creditors have been discussing the agreement since November. We expect that DSG will move even further away from Sinclair after emerging from bankruptcy and will no longer use its former parent for any significant services. We are maintaining our $22 FVE as we already assumed no value for Sinclair's equity and little-to-no revenue from DSG in our forecast.

Sinclair Broadcast Group is the second-largest television station operator in the United States, with 185 stations in 85 markets. Sinclair also owns 90% of Diamond Sports, formerly the Fox regional sports network group, which operates 21 RSNs. Diamond is a separate entity and has been deconsolidated from Sinclair's financial statements. As a result, Diamond no longer directly affects Sinclair’s reported financial performance and it likely holds little value for Sinclair shareholders.

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.

Sinclair Broadcast Group is the second-largest television station operator in the United States, with 185 stations in 85 markets. Sinclair also owns 90% of Diamond Sports, formerly the Fox regional sports network group, which operates 21 RSNs. Diamond is a separate entity and has been deconsolidated from Sinclair's financial statements. As a result, Diamond no longer directly affects Sinclair’s reported financial performance and it likely holds little value for Sinclair shareholders.

Sinclair reported a slightly better-than-expected third quarter as revenue was in line with and adjusted EBITDA beat FactSet consensus. Political ad spending through the third quarter is up 50% versus 2018 pro forma and only down 2% from 2020, a presidential election year. Management expects full-year political ad revenue to reach $335 million-$340 million, a record midterm year and 30% ahead of 2018. Despite the positive political ad news, core ad revenue fell 10% due in part to crowding out from political ads but also weakness in insurance and sports betting. We plan to lower our $30 fair value estimate after updating our model to account for slower ad growth.

Sinclair posted a slightly better-than-expected second quarter as revenue was in line with adjusted EBITDA and beat FactSet consensus. The quarter was the first since Diamond Sports Group (the regional sports networks holding company) was deconsolidated on March 1 due to the need to recapitalize the group. DSG is now held on an equity basis by Sinclair, and management barely spoke about the RSN business. Despite the change, Sinclair continues to own nearly 100% of the equity of DSG. We maintain our $30 fair value estimate.

Despite decent broadcast top line growth, Sinclair posted a mixed start to 2022 as Diamond Sports Group, or DSG, (the holding company for the regional sports networks) has been deconsolidated as of March 1, 2022. The need to recapitalize DSG, along with the installation of a new five-member board with four independent directors, forced the deconsolidation of the group. As a result of the transaction, the firm booked a $3.4 billion pretax noncash gain. Despite the change, Sinclair continues to own nearly 100% of the equity. We do not expect to change our $30 fair value estimate after adjusting our model for the deconsolidation.

Sinclair Broadcast Group is the second-largest television station operator in the United States, with 185 stations in 85 markets. Via the 2019 purchase of Fox Sports Networks, Sinclair is now also the largest owner or operator of regional sports networks with 21.

Sinclair posted a weak end to a challenging 2021 as fourth-quarter revenue and operating income missed versus FactSet consensus. Total revenue fell 2% year over year to $1.5 billion, as core advertising rebounded from the pandemic impact, but political ad spending disintegrated as expected. Revenue for the quarter would have increased if the company had not suffered from a cyberattack in October. We are maintaining our $30 fair value estimate.

Sinclair posted a weak third quarter as revenue and operating income both missed versus FactSet consensus. Despite the miss, the firm made some progress on the regional sports network front with three multiyear renewals with teams and a full-package renewal including the RSNs with Altice. We remain skeptical about the direct-to-consumer service for the RSNs, particularly with respect to the response from distributors. While management noted that customers will pay a retail price versus the lower affiliate fee, we think that distributors may start moving RSNs off the standard tier and onto either higher tiers or add-on packages. We are maintaining our no-moat rating and our fair value estimate of $30.

Sinclair Broadcast Group is the second-largest television station operator in the United States, with 190 stations in 88 markets. Via the 2019 purchase of Fox Sports Networks, Sinclair is now also the largest owner or operator of regional sports networks with 23.

Sinclair posted a slightly better than expected second quarter as our worries about the regional sports network segment persist. Revenue for the second quarter came in line with FactSet consensus, but adjusted EBITDA beat expectations. The firm’s acquisition of the Fox RSNs did bring diversification to the business but also came with carriage worries as we expect that Dish will continue to eschew the RSNs. The recent rumor about a potential acquisition by Sinclair of the NBC Sports RSNs from Comcast is a worrying sign that management may be looking to chew off more than they handle. We are maintaining our no-moat rating and our fair value estimate of $30.