The largest owner of TV stations in the U.S. got a huge lift from political advertising.
Nexstar Media (NASDAQ:NXST) stock was rising on Thursday after the nation’s largest owner of television stations reported record third quarter revenue.
The company reported $1.37 billion in revenue in the quarter, up 21% year-over-year, and on par with analysts’ estimates. It was a record for the company in the third quarter.
Net income soared to $187 million, up from just $25 million in the same quarter a year ago. Earnings per share rocketed to $5.34 per share, up from 71 cents in Q3 of 2023, but it fell short of estimates of $5.41 per share.
Despite the earnings miss, it was a strong quarter for Nexstar, driven by big gains in political advertising across its more than 200 TV stations and its networks.
The stock was up about 4% on Thursday morning after rising 6% on Wednesday. Nexstar stock is up about 19% year-to-date.
Political ads boost revenue
Nexstar owns 200 or so TV stations, more than any other company in the U.S. Through these stations, in roughly 116 markets, it reaches some 212 million people every day. It also owns several networks, most notably, the CW, along with NewsNation, Antenna TV and the Food Network, among others. In addition, it owns The Hill, a publication that covers politics.
So, it is largely responsible for those political ads you have seen on your TV seemingly nonstop for the past few months. While you may be sick of them, Nexstar is certainly not as they generate huge profits.
Nexstar reported a 22% increase in advertising revenue in the third quarter to $622 million, a record for the quarter. Of that amount, about $154 million came from political ads, which was 16% higher than the third quarter of 2020 when the last presidential election took place.
But it wasn’t just political ads that fueled Nexstar as its distribution revenue also soared, rising 20% to a record $719 million. Distribution revenue is income it makes from allowing cable and streaming platforms to carry its stations and networks.
The higher distribution revenue was due to several factors, including the growth of the CW Network. It renewed 38 CW affiliates and added two more in Miami and Detroit. It also announced that stations in Augusta, Ga., Monroe, La., Wichita Falls, Texas, Terre Haute, In., and Utica, N.Y. will become CW affiliates. Company and partner owned CW affiliates now cover 46% of TV households. CW viewership was boosted by the debuts of NASCAR Xfinity series racing and WWE NXT wrestling on its network.
The CW reduced its losses by $36 million in the quarter and $119 million through the first three quarters.
The distribution revenue also benefitted from lower revenue in Q3 2023, which was impacted by Nexstar stations going dark for a time due to a contract dispute with a Multichannel Video Programming Distributor (MVPD). But overall, it was still an all-time high for the company.
Q4 should also be strong
Nexstar’s strong Q3 also boosted its free cash flow, as it generated $327 million in the quarter, up from $81 million in Q3 2023. Through the first nine months of 2024, it has $792 million in free cash flow, up 20% year-over-year.
That has allowed it to sustain its high dividend of $1.69 per share at a yield of 3.69%. This is the 10th straight year of dividend raises.
Nexstar should see another good quarter of growth in Q4, as it will contain revenue the flood of political ads in October and through the first week of November. Overall, it was expected to be a record year for political ads, with more than $10 billion spent on them overall, up almost 20% over the 2020 presidential election.
Nexstar stock is still pretty cheap, with a P/E of 14 and a P/E to growth (PEG) ratio of 0.63, signifying a good value.
It has a median price target of $200 per share, which would be about a 5% increase. While it won’t see the same revenue spike it saw in 2024, it I still a solid long-term performer, with a 14% annualized return over the past 5 years and a 16% annualized return over the past 10.
With its growth in CW and it networks, as well as the leader in TV station ownership, it remains a decent stock with a good dividend – even post-election.
