TEGNA Shares Decline Amid Revenue Challenges and Growth Hopes

TEGNA Inc. has seen a 9% decline in share value YTD, lagging behind industry growth. Observations from a recent report indicate challenges in subscription and advertising revenue, although political ad spending may provide some relief in the coming quarters.

Date: 15-09-2024

AI Rating: 5

TEGNA (TGNA) has experienced a notable 9% decline in its share price year-to-date (YTD), contrasting with the 2.4% appreciation in the broader Consumer Discretionary Sector and the accomplishments of peers like Netflix (NFLX), Fox (FOXA), and Nexstar Media Group (NXST), which saw gains of 41%, 31.1%, and 2.4% respectively.

This underperformance is primarily due to a decrease in top-line growth driven by both reduced subscription revenues and temporary service disruptions with a distribution partner, causing sluggish growth in Advertising and Marketing Services (AMS) revenues, which ultimately affected operating income growth.

Despite these challenges, TEGNA's political revenues have shown positive growth in the first half of 2024. The company is optimistic about strong political ad spending and upcoming events, including the Summer Olympics, to enhance its top-line growth, which is expected to be in the 9-12% range for the third quarter. This optimistic forecast is noteworthy given the underlying pressures from subscription and advertising revenue growth amid a challenging macroeconomic backdrop.

TEGNA's cost management strategies are also encouraging for investors, as the company expects third-quarter operating expenses to either remain flat or decline slightly compared to the previous year.

Analyzing its future outlook further, the integration of Octillion with TEGNA's advertising platform, Premion, aims to bolster its performance despite facing hurdles in subscription revenues. The double-digit growth of local revenues through this integration demonstrates potential. However, national revenues have weakened, which may present ongoing challenges.

The downward revisions in earnings estimates reflect cautious sentiment; the consensus earnings for third-quarter 2024 is currently set at 83 cents, down 7.8% from previous estimates, while total revenues are projected at $792.44 million, signifying an 11.1% increase year-over-year. For the year 2024, the revenue estimate is approximately $3.12 billion, indicating a 7.33% growth.

Overall, despite the downside risks to subscription and AMS revenues, TEGNA maintains a valuation score of A, hinting at potential for being undervalued. The company holds a Zacks Rank of #3 (Hold), suggesting that investors might consider waiting for more favorable conditions before making investment decisions.

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