TEGNA Inc. (TGNA) Up 3.4% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for TEGNA Inc. (TGNA). Shares have added about 3.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is TEGNA Inc. due for a pullback? 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 drivers.

TEGNA Q3 Earnings Lag Estimates, Revenues Rise Y/Y

TEGNA’s third-quarter 2022 non-GAAP earnings of 65 cents per share missed the Zacks Consensus Estimate by 9.72% but increased 12.1% on a year-over-year basis.

Revenues increased 6.2% year over year to $803.1 million but missed the consensus mark by 4.71%. The year-over-year growth can be attributed to an increase in political and subscription revenues.

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.

However, in September end, the Federal Communications Commission put the acquisition under scrutiny and asked the investment firm, Standard General, to produce further information to review applications seeking consent to transfer control of Tegna's subsidiaries.

The acquisition is expected to be completed in the second half of 2022, subject to above mentioned regulatory approvals and customary closing conditions.

Quarter in Detail

Subscription (47% of revenues) revenues increased 2.4% year over year to $377.4 million, driven by rate increases and partially offset by subscriber declines.

Advertising and Marketing services (39.9% of revenues) revenues decreased 11.9% year over year to $320.8 million due to political displacement, the absence of last year’s summer Olympics and macroeconomic headwinds.

Political (11.6% of revenues) revenues were $92.9 million, up 518.9% year over year.

Other revenues (1.5% of revenues) were $12.1 million, up 40.9% year over year.

Non-GAAP adjusted EBITDA increased 8.8% year over year to $266 million. Adjusted EBITDA margin expanded 80 basis points (bps) from the year-ago period to 33.1%.

Non-GAAP operating expenses (71.1% of revenues) of $570.9 million were up 4.7% year over year.

Non-GAAP operating income increased 9.9% year over year to $232.3 million. The operating margin expanded 100 bps from the year-ago period to 28.9%.

Balance Sheet & Cash Flow

As of Sep 30, 2022, total cash was $377 million compared with $201 million as of Jun 30, 2022.

Total debt was $3.1 billion, and net leverage was 2.53 times as of Sep 30, 2022.

Free cash flow in the third quarter was $148.4 million compared with $162 million reported in the previous quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -16.51% due to these changes.

VGM Scores

Currently, TEGNA Inc. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise TEGNA Inc. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

TEGNA Inc. is part of the Zacks Broadcast Radio and Television industry. Over the past month, Fox (FOXA), a stock from the same industry, has gained 5.3%. The company reported its results for the quarter ended September 2022 more than a month ago.

Fox reported revenues of $3.19 billion in the last reported quarter, representing a year-over-year change of +4.8%. EPS of $1.21 for the same period compares with $1.11 a year ago.

Fox is expected to post earnings of $0.52 per share for the current quarter, representing a year-over-year change of +300%. Over the last 30 days, the Zacks Consensus Estimate has changed -2.2%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Fox. Also, the stock has a VGM Score of A.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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