Sinclair (NASDAQ:SBGI) Misses Q1 Revenue Estimates, But Stock Soars 6.7%

Television broadcasting and media company Sinclair (NASDAQ:SBGI) fell short of analysts' expectations in Q1 CY2024, with revenue up 3.2% year on year to $798 million. On the other hand, next quarter's revenue guidance of $833 million came in slightly above analysts' estimates. It made a GAAP profit of $0.35 per share, down from its profit of $2.65 per share in the same quarter last year.

Is now the time to buy Sinclair? Find out by accessing our full research report, it's free.

Founded in 1971, Sinclair (NASDAQ:SBGI) is an American media company operating numerous television stations and providing multi-platform broadcasting services.

Broadcasting

Broadcasting companies have been facing secular headwinds in the form of consumers abandoning traditional television and radio in favor of streaming services. As a result, many broadcasting companies have evolved by forming distribution agreements with major streaming platforms so they can get in on part of the action, but will these subscription revenues be as high quality and high margin as their legacy revenues? Only time will tell which of these broadcasters will survive the sea changes of technological advancement and fragmenting consumer attention.

Sales Growth

A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one may grow for years. Sinclair's revenue was flat over the last five years. Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Sinclair's recent history shows a reversal from its five-year trend as its revenue has shown annualized declines of 26.9% over the last two years.

This quarter, Sinclair's revenue grew 3.2% year on year to $798 million, falling short of Wall Street's estimates. The company is guiding for revenue to rise 8.5% year on year to $833 million next quarter, improving from the 8.2% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 13.5% over the next 12 months, an acceleration from this quarter.

Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefitting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.

Operating Margin

Operating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Sinclair was profitable over the last two years but held back by its large expense base. Its average operating margin of 3.4% has been paltry for a consumer discretionary business.

This quarter, Sinclair generated an operating profit margin of 5.3%, up 2.5 percentage points year on year.

Over the next 12 months, Wall Street expects Sinclair to become profitable. Analysts are expecting the company’s LTM operating margin of negative 9.8% to rise to positive 15.2%.

Key Takeaways from Sinclair's Q1 Results

We were impressed by how significantly Sinclair blew past analysts' EPS expectations this quarter. We were also glad next quarter's revenue and adjusted EBITDA guidance came in higher than Wall Street's estimates. Zooming out, we think this was a solid quarter, showing that the company is staying on track. The stock is up 6.7% after reporting and currently trades at $14.15 per share.

So should you invest in Sinclair right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.