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TEGNA Inc. (TGNA) Up 0.2% 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 0.2% 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 Q2 Earnings Beat Estimates, Revenues Rise Y/Y

TEGNA’s second-quarter 2022 non-GAAP earnings of 60 cents per share beat the Zacks Consensus Estimate by 7.14% and increased 20% on a year-over-year basis.

Revenues increased 7.1% year over year to $784.9 million but missed the consensus mark by 0.8%. The year-over-year growth can be attributed to an increase in political and subscription revenues, despite a volatile macroeconomic environment.

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.

With the acquisition in place, Tegna will become the United States’ largest minority-owned broadcast group.

The acquisition is currently on track and is expected to be completed in the second half of 2022, subject to closing conditions.

Quarter in Detail

Subscription (49.6% of revenues) revenues increased 3.7% year over year to $389.1 million due to rate increases, partially offset by subscriber declines.

Advertising and Marketing services (42.7% of revenues) revenues decreased 1.7% year over year to $335.3 million due to softness in certain advertising categories, primarily auto, which continues to be impacted by supply chain disruptions.

Political (6.5% of revenues) revenues were $50.9 million, up 430.8% year over year

Other revenues (1.2% of revenues) were $9.7 million, up 31.6% year over year.

Non-GAAP adjusted EBITDA increased 12.3% year over year to $255.7 million. Adjusted EBITDA margin expanded 150 basis points (bps) from the year-ago period to 32.6%.

Non-GAAP operating expenses (71.3% of revenues) of $559.8 million were up 4.3% year over year, predominantly driven by investments in growth initiatives such as Premion and programming costs.

Non-GAAP operating income increased 14.8% year over year to $225.1 million. The operating margin expanded 190 bps from the year-ago period to 28.7%.

Balance Sheet & Cash Flow

As of Jun 30, 2022, total cash was $201 million compared with $43 million as of Mar 31, 2022.

Total debt was $3.1 billion and net leverage was 2.70 times as of Jun 30, 2021.

Free cash flow in the second quarter was $162 million compared with $182 million reported in the previous quarter. The uptick can be attributed to growth in political revenues.

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 -8.86% due to these changes.

VGM Scores

At this time, 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 quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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.


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