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TEGNA (TGNA) Acquires WTOL & KWES, Boosts Portfolio Strength

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TEGNA (TGNA - Free Report) recently announced that it has completed the acquisition of WTOL in Toledo, OH, and KWES in Midland-Odessa, TX, from Gray Television (GTN - Free Report) .

The all-cash deal worth $105 million is expected to be accretive to free cash flow immediately after closing of the transaction and to earnings in less than a year after its closure. Moreover, the transaction will have no material impact on TEGNA’s leverage, which is a positive.

Further, the acquisition has expanded TEGNA’s market reach. The company currently operates 49 TV stations in 41 markets, catering to one-third TV households in the United States.

Notably, TEGNA “remains the largest NBC affiliate group, the second largest CBS affiliate group and the largest owner of Big 4 affiliates in the top 25 markets”, per Management.

TEGNA Inc. Revenue (TTM)

 

TEGNA Inc. Revenue (TTM) | TEGNA Inc. Quote

Acquisitions, Solid Political Revenues to Aid Top Line

TEGNA, which reaches 50 million users on TV and 30 million users on digital platforms each month, is seeking acquisitions to boost portfolio and drive top-line growth. The company is active in expanding its market reach through acquisitions. The acquisitions are likely to result in efficient cost structurethereby driving profitability.

KWES, a Comcast (CMCSA - Free Report) owned NBC affiliate, is expected to strengthen TEGNA’s presence in the state of Texas, where it currently covers 87% of TV household and owns 12 stations. Moreover, WTOL, a CBS affiliate, which reaches about 380,000 TV households, joined TEGNA’s WKYC and WZZM to serve Ohio and Michigan users.

Both WTOL and KWES are strong local media brands that are well placed in their key markets, per Management.

Prior to this acquisition, TEGNA acquired the broadcasting stations of Midwest Television, which include KFMB-TV, KFMB-D2 (CW), KFMB-AM and KFMB-FM. The deal expanded the company’s U.S. television household reach by more than one million.

Moreover, the presence of WTOL, WKYC and WZZM in key political areas is expected to boost ad dollars momentum in 2019 as well, owing to the upcoming U.S. state elections.

Notably, solid political advertising revenues constituted one of the main contributors to top-line growth. Earnings were up 16.1% year over year to $538.9 million in third-quarter fiscal 2018. Additionally, year to date, political revenues ($238 million) recorded an all-time high, including presidential election years, and came well above the previous mid-term election in 2014.

Further, for fourth-quarter 2018, TEGNA expects revenues to increase in the range of 30-32% on a year-over-year basis, primarily driven by political and subscription revenue growth.

TEGNA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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