Nexstar Broadcasting Group Faces Price Target Adjustments

Nexstar Broadcasting Group Faces Price Target Adjustments

Benchmark has updated its price target for Nexstar Broadcasting Group (NASDAQ: NXST) to $215, down from the previous target of $225, while retaining a Buy rating on the stock. This adjustment reflects the challenges Nexstar has been encountering in the market.

Analysts at Benchmark acknowledged that Nexstar continues to be a top performer in its sector. However, a series of minor market issues have collectively impacted the company's performance, exerting downward pressure on its fundamentals.

Market Challenges and Performance Insights

Nexstar has faced struggles in meeting expected returns amidst a sluggish national market. Although there are positives, such as the enhancement of sports programming on the CW network in recent years, these benefits have not compensated for the decline in non-political advertising revenue. Consequently, the firm revised its EBITDA projections for 2024 and 2025 accordingly.

Despite reducing expectations for 2024's EBITDA by $20 million and for 2025 by $55 million due to diminishing non-political ad revenues, Benchmark has increased its political advertising forecast for Nexstar by about $20 million to $600 million. Analysts predict that consensus figures could gravitate toward approximately $1.6 billion in the coming months unless market dynamics markedly improve.

Executive Changes and Financial Outlook

Recent updates from Nexstar Media Group indicate significant shifts within its executive framework alongside its financial outlook. As part of a restructuring strategy aimed at streamlining operations, the company announced the departure of its Executive Vice President and Chief Revenue Officer, Michael Strober.

In a related study, Guggenheim has affirmed a Buy rating for Nexstar but has reduced its price target from $200 to $198 due to adjustments in the company’s financial forecasts for the latter part of the year. Their revised estimates expect third-quarter revenue to hit $1.373 billion and EBITDA to be around $473 million, with fourth-quarter revenue anticipated at $1.603 billion and EBITDA projected to reach $684 million.

Advertising Revenue Trends

These adjustments stem from a more subdued advertising market and the early activation of The CW’s NASCAR contract. Despite the challenges, political advertising appears robust, with Guggenheim estimating record political ad revenue contributions of $604 million.

Nexstar remains committed to achieving unprecedented financial milestones; it has reported record total net revenue and the highest distribution revenues for three consecutive quarters. This success is attributed to strategic partnerships with major sports leagues and a successful launch of NewsNation. Moreover, the company’s Board of Directors has recently welcomed Ellen Johnson and approved an impressive $1.5 billion share repurchase program.

InvestingPro Insights and Shareholder Value

Nexstar’s financial status and performance metrics resonate with Benchmark’s analysis, highlighted by the latest data from InvestingPro. In spite of market difficulties, Nexstar demonstrates a robust dividend profile, showcasing a current yield of 3.98% and significant dividend growth of 25.19% over the preceding year.

InvestingPro provides insight into Nexstar's dedication to creating shareholder value. Management has been proactive in share buybacks and has maintained a record of increasing dividends for 11 consecutive years. These factors align with the firm's strategy of enhancing shareholder returns through share repurchase and consistent dividend increments.

With a P/E ratio of 12.48, Nexstar’s stock could be seen as undervalued compared to its earnings, presenting potential opportunities for investors, even with the latest price target adjustment. Notably, InvestingPro estimates a fair value of $214.99 for Nexstar, closely matching Benchmark's adjusted price target.

Frequently Asked Questions

What did Benchmark adjust Nexstar's price target to?

Benchmark reduced Nexstar's price target from $225 to $215 while maintaining a Buy rating.

What challenges is Nexstar currently facing?

Nexstar is facing downward pressure on its fundamentals due to minor market issues and a decline in non-political advertising revenue.

What are the future projections for Nexstar’s EBITDA?

Benchmark forecasts a $20 million decrease in expected 2024 EBITDA and a $55 million reduction for 2025.

How has Nexstar performed in advertising recently?

While Nexstar has faced a softer advertising market, political advertising is projected to remain strong, contributing significantly to revenues.

What strategic moves is Nexstar making in terms of management?

Nexstar has undergone executive changes, notably the departure of its Chief Revenue Officer as part of a restructuring effort.

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