For many TV viewers, the political ads that invade the
airwaves every four years inspire one fantasy: picking up a brick
and firing it Randy Johnson-style at the middle of the television
But for companies that own and operate TV stations, political
ads are like angels from on high, sprinkling dollar signs and
profits like so much fairy dust.
Those dollar signs come in the form of ad revenue -- and lots
According to estimates cited by AdWeek, total TV spending on
political ads in the U.S. was expected to reach nearly $3.4
billion in 2012 with local TV accounting for as much as $2.8
billion of the total.
Both numbers are records and represent a huge increase from
the 2008 presidential election year.
Among the beneficiaries isSinclair Broadcast (
), one of the nation's largest TV-station operators.
Sinclair operates more than 80 TV stations, including
affiliates of all the major networks. Its signals reach more than
one-quarter of all U.S. households.
During the third quarter, Sinclair rang up $27.8 million in
political ad revenue. That compares with only $2.4 million a year
The company expects roughly double that amount in political ad
revenue for the fourth quarter.
"For Q4, Sinclair expects political (ad revenue) to be $54
million to $56 million, nearing-to-surpassing what it garnered in
all of 2008," JPMorgan analyst Alexia Quadrani noted in a
third-quarter earnings report.
Sinclair's annual revenue in 2012 is expected to top $1
billion for the first time in the company's history. Last year,
Sinclair logged $765 million in revenue.
Political ad spending isn't the only growth driver for TV
They also have benefited from ad spending on the London
Olympics in August and a resurgence in ad spending by
"It's really a perfect storm for local television," Douglas
Arthur, media analyst with Evercore Partners, told IBD in a
In fact, Sinclair officials are quick to point out the
company's strong recent financial returns are not just due to the
2012 presidential, congressional, state and local elections.
"Despite increased demand for air time by politicians and
political action groups, the core business showed solid growth.
On a same station basis, excluding political, net broadcast
revenue grew 6.9% in the third quarter," Chief Executive David
Smith said in a statement following his company's Q3 earnings
Sinclair reported total revenue of $260 million during the
quarter. That was up 44% from the prior year and above Wall
Street estimates for $256 million.
The company has delivered three straight quarters of
22%-or-better revenue growth, ending a run of four straight
quarters of single-digit gains or declines. Top-line growth has
accelerated each of the last four quarters.
In addition to robust political ad revenue during the third
quarter, "auto net broadcasting revenue was strong, up 12%, and
telecom finally rebounded, also up 12%," analyst Quadrani
Earnings for the quarter came in at 36 cents a share,
excluding special items. That was up from 24 cents a year earlier
and slightly above views for 35 cents. Sinclair has grown
earnings in double digits in eight of the last nine quarters.
The company also declared a special dividend of $1 in addition
to its regular quarterly dividend of 15 cents.
Meanwhile, Sinclair's stock price hit a 5-1/2-year high of
12.84 on Dec. 21. Shares are up more than 70% since mid-June.
Although Sinclair won't have the benefit of large political
and Olympics ad revenue in 2013, the company is still expected to
grow the top line thanks to its recently closed buyout of seven
TV stations from Newport Television.
That deal, valued at $460 million, closed Dec. 3. It brought
aboard the following stations: WKRC in Cincinnati, Ohio; WOAI in
San Antonio, Texas, WHP in Harrisburg, Pa., WPMI and WJTC in
Mobile, Ala., KSAS in Wichita, Kan. and WHAM in Rochester,
The company also acquired Newport's rights under local
marketing agreements with WLYH in Harrisburg, Pa., and KMTW in
Wichita, Kan., as well as options to acquire the license
Other recent deals include Sinclair's announcement to spend
$12.5 million on the nonlicense assets of KBTV, the FOX affiliate
in the Beaumont/Port Arthur, Texas, market, where Sinclair also
owns the CBS station.
The company also agreed to sell its ABC station, WLAJ, in
Lansing, Mich., for $14.4 million.
In early January 2012, Sinclair closed its acquisition of Four
Points Media from affiliates of Cerberus Capital Management for
$200 million. That deal brought aboard a total of seven TV
stations in Utah, Texas, Florida and Massachusetts.
Analysts polled by Thomson Reuters expect Sinclair to post
full-year 2012 earnings of $1.64 a share, a gain of 69% from
2011. However, they see profit dipping to $1.33 a share in