TEGNA’s Decline amidst Strong Market
TEGNA’s shares have stumbled, down 9% year to date. This downward trend is starkly in contrast to the Consumer Discretionary Sector’s rise of 2.4%. Among notable peers like Netflix, Fox, and Nexstar Media Group, TEGNA has lagged behind substantially. While competitors have seen robust growth, TEGNA faces challenges with falling subscription revenues and disruptions in service. The slowdown in Advertising and Marketing Services (AMS) revenues further contributes to the stagnant top-line growth.
Political Revenue Driving Growth
Despite these setbacks, TEGNA has witnessed a surge in political revenues, offering a silver lining amid the gloom. The company anticipates the upcoming political ad spending spree and the allure of the Summer Olympics to propel its revenue growth in the third quarter. This is a significant development given the headwinds faced by reduced national ad spending and a sluggish macroeconomic environment.
A Glimmer of Hope with Expense Management
On a positive note for investors, TEGNA has demonstrated prudent management of its expenses. By keeping a tight rein on costs, the company expects to maintain third-quarter operating expenses either flat or slightly declining in comparison to the previous year. This disciplined approach instills confidence in the company’s ability to weather the storm.
TEGNA’s Strategy with Premion
Through integrating Octillion into Premion, its CTV/OTT advertising platform, TEGNA has shown strategic foresight. This move bolsters Premion’s capabilities by marrying advanced technology with innovative advertising solutions. Despite some setbacks in national Premion revenues, the company remains optimistic about the growth prospects spurred by robust political ad spending.
Challenges on the Earnings Front
While TEGNA has shown resilience in certain aspects of its business, a downward trend in earnings estimates raises concerns. The Zacks Consensus Estimate for both the third quarter and full-year earnings of 2024 has witnessed a decline over the past month. This downward trajectory underscores the challenges the company faces in translating its strategies into tangible financial results.
Investor Strategy: Buy, Hold, or Sell?
As TEGNA’s shares currently trade at an undervalued level, investors might view this as an opportunity. However, the prevailing headwinds related to subscription and AMS revenues warrant caution. With a Zacks Rank #3 (Hold), investors may want to adopt a watchful stance, awaiting a more favorable entry point into the market.
Zacks Investment Research