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The Zacks Broadcast Radio and Television industry has been suffering from an increasing rate of cord-cutting. Moreover, coronavirus-induced restrictions on production of movies and shows have cast a shadow on the industry’s prospects.
Nonetheless, TEGNA, The E.W. Scripps Company and Entravision Communications are a few industry participants set to benefit from their diversified content offerings, which are original, regional, short and suitable for small screens (smartphones and tablets), increased content consumption and improved Internet speed and penetration, and technological advancement.
As monetization and revenues in terms of ad-spend continue to be subdued, profit protection and cash management with greater technology integration has gained strategic significance and is expected to aid these companies in driving top-line growth in the near term.
Industry Description
The Zacks Broadcast Radio and Television industry comprises companies offering entertainment, sports, news, non-fiction and musical content over television, radio and digital media platforms. These companies majorly derive revenues from the sale of television and radio programs, advertising slots as well as subscriptions.
Notably, these industry players are increasing their spend on research and development as well as sales & marketing in order to stay afloat in an era of technological advancements with increased demand for VR and Internet Radio among audiences. The Broadcast Radio and Television industry is likely to remain focused on sustenance at current levels along with renewed emphasis on flexibility, which would accelerate the move to a variable cost model and reduce fixed costs.
4 Broadcast Radio and Television Industry Trends to Watch Out For
Shift in Consumer Preference a Key Catalyst: To adapt to the changes in the industry, companies are coming up with varied content for over-the-top (OTT) services in addition to linear TV. Additionally, they are adding OTT services to their content portfolio. In March, ViacomCBS launched its highly anticipated streaming service, Paramount+, in the United States.
The availability of streaming services on a wide range of platforms is helping such services easily reach a global audience. It is also helping them to expand their international user base, which in turn, attracts advertisers to their platforms, thereby boosting ad revenues.
Moreover, the use of services to help advertisers measure their ROI and enhance their use cases is expected to benefit advertisers and industry participants. Recent resumption of live sports events such as NFL, NHL, Olympics, European Games and elections after delay and cancellations over the past year is expected to boost advertiser demand.
Increased Digital Viewing Aids Content Demand: Many industry participants who are either launching their own OTT services or acquiring other OTT services are banking on user insights to deliver the right content. Increased digital viewing is making consumer data easily available to companies, thereby allowing them to apply AI and machine-learning techniques to create/procure targeted content. The move not only boosts user engagement but also lets industry participants raise prices of their services at appropriate times without the fear of losing subscribers.
Coronavirus Hurts Production and Ad Demand: Industry participants are bearing the brunt of coronavirus-induced macroeconomic woes and heightened fears of a prolonged recession. Increased rate of unemployment is expected to increase cord-cutting. Moreover, slow production threatens to defer supply of new content. Advertising is a major source of revenues for this industry, which has been badly hit by the coronavirus.
Recovering low ad demand and reduced spending are expected to hurt the top line in the near term. The industry players are facing stiff competition from tech companies like Facebook, Twitter, Google and Amazon for ad-dollars. This has been a major impediment to growth.
Low-Priced Skinny Bundles Hurt Revenues: Increase in cord cutting has forced industry participants to offer “skinny bundles.” These services, which are available through the Internet, often contain fewer channels than a traditional subscription and therefore are cheaper.
The move is in line with changing consumer viewing dynamics as growth in Internet penetration and advancements in mobile, video and wireless technologies have boosted small-screen viewing. The alternative services are expected to keep users glued to their platforms, thereby increasing demand for more content.
Moreover, lockdowns and shelter-in-place guidelines that compelled people to stay at home have significantly increased viewership and audience base. However, the low-priced skinny bundles are likely to dampen top-line growth.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Broadcast Radio and Television industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #116, which places it in the top 46% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic on this group’s earnings growth potential. Since Sep 30, 2020, the industry’s earnings estimate for 2021 has moved up 2.4%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Beats Sector, Lags S&P 500
The Zacks Broadcast Radio and Television industry has outperformed the broader Zacks Consumer Discretionary sector while lagging the S&P 500 Index over the past year.
The industry has gained 37.1% over this period compared with the S&P 500’s increase of 38.8% and the broader sector’s rally of 30.7%.
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization), which is a commonly used multiple for valuing Broadcast Radio and Television stocks, the industry is currently trading at 26.66X versus the S&P 500’s 17.48X and the sector’s 14.46X.
Over the past five years, the industry has traded as high as 33.21X and as low as 18.18X, recording a median of 22.76X.
3 Broadcast Radio and Television Stocks to Watch
The E.W. Scripps Company: This Cincinnati, OH-based Zacks Rank #1 (Strong Buy) company has been benefiting from higher retransmission revenues.
Recently, the company launched Florida 24 Network, a new state-wide news network available over-the-top (OTT) for viewers in every local TV market in the state of Florida.
Additionally, the company completed its acquisition of national broadcast network, ION Media and combined it with Court TV, Newsy, Bounce, Grit, Laff and Court TV Mystery to create the Scripps Networks division. The media company estimates that the acquisition will create $500 million in synergies over the next six years, predominantly derived from carriage fee savings related to Katz Networks.
Moreover, the company is experiencing a rebound in advertising demand and spending. The top five core advertising categories were up on a year-over-year basis in the first quarter of 2021. Markedly, the stock has gained 33.1% year to date.
Notably, the Zacks Consensus Estimate for 2021 earnings has been revised upward by 22.5% over the past 60 days to $1.74 per share.
TEGNA: This McLean, VA-based Media Company offering high-quality television programming and digital content has been benefiting from a stable subscriber base and higher rates. Solid contribution from acquisitions, a continued spike in subscription revenues and strong spending on political advertisements are major drivers of this Zacks Rank #2 (Buy) company.
The focus on local content is driving subscription revenues from traditional cable and satellite operators as well as OTT providers. TEGNA’s buyouts of local TV stations that comprise the Big Four affiliates along with aggressive spending on political ads are likely to aid its top line in the rest of 2021.
The Zacks Consensus Estimate for 2021 earnings has moved up 9.7% to $2.03 over the past 60 days. The stock has gained 34.2% year to date.
Santa Monica, CA-based Entravision Communications is a diversified media company, utilizing a combination of television, radio, outdoor and publishing operations to reach Hispanic consumers in the United States.
This Zacks Rank #2 company provides Latino data and digital services to advertisers. Entravision’s increasing digital advertising solutions portfolio is a major growth driver.
The recent acquisition of Cisneros Interactive has significantly expanded Entravision’s digital offerings to customers, representing some of the strongest global audience and ad tech platforms.
However, softness in coronavirus-induced ad spending is obstructing top-line growth. Nonetheless, strength in the television and digital segment boosted by increases in revenues from spectrum usage rights and local and national advertising revenues are key growth drivers.
Moreover, expansion into Mexico, Argentina and Colombia are expected to further boost advertiser base and aid top-line growth in the near term. The stock has gained 98.1% year to date.
The Zacks Consensus Estimate for earnings in 2021 has increased 60.9% to 37 cents per share over the past 60 days.
Zacks' Top Picks to Cash in on Artificial Intelligence
In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights: TEGNA, The E.W. Scripps Company and Entravision Communications
For Immediate Release
Chicago, IL – June 17, 2021 – Today, Zacks Equity Research discusses Broadcast - Radio & TV, including TEGNAInc. (TGNA - Free Report) , The E.W. Scripps Company (SSP - Free Report) and Entravision Communications Corporation (EVC - Free Report) .
Link: https://www.zacks.com/commentary/1716812/3-broadcast-radio-tv-stocks-to-tap-from-a-prospering-industry
The Zacks Broadcast Radio and Television industry has been suffering from an increasing rate of cord-cutting. Moreover, coronavirus-induced restrictions on production of movies and shows have cast a shadow on the industry’s prospects.
Nonetheless, TEGNA, The E.W. Scripps Company and Entravision Communications are a few industry participants set to benefit from their diversified content offerings, which are original, regional, short and suitable for small screens (smartphones and tablets), increased content consumption and improved Internet speed and penetration, and technological advancement.
As monetization and revenues in terms of ad-spend continue to be subdued, profit protection and cash management with greater technology integration has gained strategic significance and is expected to aid these companies in driving top-line growth in the near term.
Industry Description
The Zacks Broadcast Radio and Television industry comprises companies offering entertainment, sports, news, non-fiction and musical content over television, radio and digital media platforms. These companies majorly derive revenues from the sale of television and radio programs, advertising slots as well as subscriptions.
Notably, these industry players are increasing their spend on research and development as well as sales & marketing in order to stay afloat in an era of technological advancements with increased demand for VR and Internet Radio among audiences. The Broadcast Radio and Television industry is likely to remain focused on sustenance at current levels along with renewed emphasis on flexibility, which would accelerate the move to a variable cost model and reduce fixed costs.
4 Broadcast Radio and Television Industry Trends to Watch Out For
Shift in Consumer Preference a Key Catalyst: To adapt to the changes in the industry, companies are coming up with varied content for over-the-top (OTT) services in addition to linear TV. Additionally, they are adding OTT services to their content portfolio. In March, ViacomCBS launched its highly anticipated streaming service, Paramount+, in the United States.
The availability of streaming services on a wide range of platforms is helping such services easily reach a global audience. It is also helping them to expand their international user base, which in turn, attracts advertisers to their platforms, thereby boosting ad revenues.
Moreover, the use of services to help advertisers measure their ROI and enhance their use cases is expected to benefit advertisers and industry participants. Recent resumption of live sports events such as NFL, NHL, Olympics, European Games and elections after delay and cancellations over the past year is expected to boost advertiser demand.
Increased Digital Viewing Aids Content Demand: Many industry participants who are either launching their own OTT services or acquiring other OTT services are banking on user insights to deliver the right content. Increased digital viewing is making consumer data easily available to companies, thereby allowing them to apply AI and machine-learning techniques to create/procure targeted content. The move not only boosts user engagement but also lets industry participants raise prices of their services at appropriate times without the fear of losing subscribers.
Coronavirus Hurts Production and Ad Demand: Industry participants are bearing the brunt of coronavirus-induced macroeconomic woes and heightened fears of a prolonged recession. Increased rate of unemployment is expected to increase cord-cutting. Moreover, slow production threatens to defer supply of new content. Advertising is a major source of revenues for this industry, which has been badly hit by the coronavirus.
Recovering low ad demand and reduced spending are expected to hurt the top line in the near term. The industry players are facing stiff competition from tech companies like Facebook, Twitter, Google and Amazon for ad-dollars. This has been a major impediment to growth.
Low-Priced Skinny Bundles Hurt Revenues: Increase in cord cutting has forced industry participants to offer “skinny bundles.” These services, which are available through the Internet, often contain fewer channels than a traditional subscription and therefore are cheaper.
The move is in line with changing consumer viewing dynamics as growth in Internet penetration and advancements in mobile, video and wireless technologies have boosted small-screen viewing. The alternative services are expected to keep users glued to their platforms, thereby increasing demand for more content.
Moreover, lockdowns and shelter-in-place guidelines that compelled people to stay at home have significantly increased viewership and audience base. However, the low-priced skinny bundles are likely to dampen top-line growth.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Broadcast Radio and Television industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #116, which places it in the top 46% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic on this group’s earnings growth potential. Since Sep 30, 2020, the industry’s earnings estimate for 2021 has moved up 2.4%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Beats Sector, Lags S&P 500
The Zacks Broadcast Radio and Television industry has outperformed the broader Zacks Consumer Discretionary sector while lagging the S&P 500 Index over the past year.
The industry has gained 37.1% over this period compared with the S&P 500’s increase of 38.8% and the broader sector’s rally of 30.7%.
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization), which is a commonly used multiple for valuing Broadcast Radio and Television stocks, the industry is currently trading at 26.66X versus the S&P 500’s 17.48X and the sector’s 14.46X.
Over the past five years, the industry has traded as high as 33.21X and as low as 18.18X, recording a median of 22.76X.
3 Broadcast Radio and Television Stocks to Watch
The E.W. Scripps Company: This Cincinnati, OH-based Zacks Rank #1 (Strong Buy) company has been benefiting from higher retransmission revenues.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Recently, the company launched Florida 24 Network, a new state-wide news network available over-the-top (OTT) for viewers in every local TV market in the state of Florida.
Additionally, the company completed its acquisition of national broadcast network, ION Media and combined it with Court TV, Newsy, Bounce, Grit, Laff and Court TV Mystery to create the Scripps Networks division. The media company estimates that the acquisition will create $500 million in synergies over the next six years, predominantly derived from carriage fee savings related to Katz Networks.
Moreover, the company is experiencing a rebound in advertising demand and spending. The top five core advertising categories were up on a year-over-year basis in the first quarter of 2021. Markedly, the stock has gained 33.1% year to date.
Notably, the Zacks Consensus Estimate for 2021 earnings has been revised upward by 22.5% over the past 60 days to $1.74 per share.
TEGNA: This McLean, VA-based Media Company offering high-quality television programming and digital content has been benefiting from a stable subscriber base and higher rates. Solid contribution from acquisitions, a continued spike in subscription revenues and strong spending on political advertisements are major drivers of this Zacks Rank #2 (Buy) company.
The focus on local content is driving subscription revenues from traditional cable and satellite operators as well as OTT providers. TEGNA’s buyouts of local TV stations that comprise the Big Four affiliates along with aggressive spending on political ads are likely to aid its top line in the rest of 2021.
The Zacks Consensus Estimate for 2021 earnings has moved up 9.7% to $2.03 over the past 60 days. The stock has gained 34.2% year to date.
Santa Monica, CA-based Entravision Communications is a diversified media company, utilizing a combination of television, radio, outdoor and publishing operations to reach Hispanic consumers in the United States.
This Zacks Rank #2 company provides Latino data and digital services to advertisers. Entravision’s increasing digital advertising solutions portfolio is a major growth driver.
The recent acquisition of Cisneros Interactive has significantly expanded Entravision’s digital offerings to customers, representing some of the strongest global audience and ad tech platforms.
However, softness in coronavirus-induced ad spending is obstructing top-line growth. Nonetheless, strength in the television and digital segment boosted by increases in revenues from spectrum usage rights and local and national advertising revenues are key growth drivers.
Moreover, expansion into Mexico, Argentina and Colombia are expected to further boost advertiser base and aid top-line growth in the near term. The stock has gained 98.1% year to date.
The Zacks Consensus Estimate for earnings in 2021 has increased 60.9% to 37 cents per share over the past 60 days.
Zacks' Top Picks to Cash in on Artificial Intelligence
In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.
See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.