Nexstar, Sinclair CEOs See Big Political Year, Differ on Sports Betting Upside
Nexstar and Sinclair expect a 2020 political advertising boom and didn’t lay out any immediate merger and acquisitions plans, in respective Q4 calls Wednesday. Nexstar CEO Perry Sook and Sinclair CEO Chris Ripley have opposite views on the upside of sports betting. Executives of both companies said their stocks are cheap. Sinclair ended the day down 15% at $23.36. Nexstar fell 6% to $107.02.
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“We expect record political ads for 2020,” said Sinclair Chief Financial Officer Lucy Rutishauser. Ripley predicted the election will be “highest on record” for political ad spending, and Sinclair is seeing numbers ahead of the same point in 2016. Sook said “a goodly portion” of spending his company has seen in Q1 came from the entrance into the Democratic primary race of former New York City Mayor Michael Bloomberg. Some political action committees and candidates may be holding back their money for later in the face of Bloomberg’s spending spree, Sook said. “The game is played in the two months before the election.”
Opportunities for Sinclair connected with legal sports gambling will go beyond commercials, Ripley said, because of his company’s sports networks and sports content. Sinclair is “starting to see benefits” from ads in the areas where sports betting has been legalized. Sook's “sanguine” about its being “a game changing category.” He conceded legalized gambling could improve viewer engagement with sports content.
Ripley said Sinclair is focusing on growth from its regional sports networks, revenue connected with sports betting, and sports content rights. There are “a number of organic opportunities that we have in the hopper,” he said. “Not to say we aren’t active on the M&A front, but very disciplined on value.”
Nexstar is working to digest Tribune, and completing purchase and sale agreements it reached with Fox last year, Sook said. Nexstar is up against the 39 percent audience-reach broadcast ownership cap. Nexstar CFO Tom Carter said the tax status of the former Tribune properties means the company would have to pay a substantial tax bill for selling any of them, making such deals unlikely.
Progress on ATSC 3.0 continues, Ripley said, noting Sinclair’s membership in the Pearl TV consortium and announcements at CES of 20 TV models ready to receive next-gen transmissions. Similar demos are slated for NAB 2020, Ripley said. Broadcasters are “on track” to deploy in many markets in 2020, he said.
Asked if he’s concerned about the coronavirus affecting Nexstar’s earnings, Sook didn't think it will have a negative impact. Viewers quarantined in their homes are likely to watch more TV, and advertisers could see that as a benefit, he said. If the virus “becomes widespread in the United States,” it “could potentially benefit our business,” Sook said.
“There has been misinformation in the marketplace that has unfortunately depressed our stock valuation,” Ripley said. “Our current stock price ascribes no value to our sports segment. Carter said Nexstar’s stock price isn't an accurate portrayal of the company’s value.
Sinclair Q4 revenue increased 82% to $1.6 billion, from the same period the previous year. “Political revenues were $23 million in the fourth quarter versus $150 million in the fourth quarter of 2018, an election year,” it reported. Nexstar net revenue rose 39% to $1.1 billion, it said.