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TEGNA (TGNA) and ABC Extend Multi-Year Affiliate Agreement

Zacks Equity Research

TEGNA TGNA recently renewed its multi-year deal with Disney DIS owned ABC Entertainment. The deal covers all ABC-affiliated stations that TEGNA owns and operates in nine markets nationwide.

The nine markets serve about 8 million households and cover nearly 7% of U.S. users.

Content Strength, Ad Dollars to Aid Top Line

TEGNA, which is the largest owner of Big 4 affiliates in the top 25 markets, is expected to benefit from its deals with affiliates. The deals will expand its content offerings and boost user engagement levels thereby attracting advertising dollars.

TEGNA also invests in local content such as news, sports, and entertainment to give a differentiated experience to its users and keep them engaged to its stations. Notably, ad dollars from local news stations constitute the major portion of its total advertising revenues, per management.

Additionally, owing to the upcoming U.S. state elections revenue from political ads is expected to drive top-line. Notably, solid political advertising revenues constituted one of the main contributors to the top line in third-quarter 2018.

Political revenues ($238 million in third-quarter 2018) recorded an all-time high, including presidential election years, and came well above the previous mid-term election in 2014.

TEGNA Inc. Revenue (TTM)

TEGNA Inc. Revenue (TTM) | TEGNA Inc. Quote

 

Acquisitions to Expand Market Reach

TEGNA is eyeing acquisitions to boost its content portfolio and expand its market reach. The company recently acquired WTOL, a CBS CBS affiliate in Ohio and KWES, a Comcast CMCSA owned NBC affiliate in Texas, thereby expanding its reach to 41 markets.

KWES is expected to strengthen TEGNA’s presence in the state of Texas, where it currently covers 87% of TV household and owns 12 stations. Moreover, WTOL, which reaches about 380,000 TV households, joined TEGNA’s WKYC and WZZM to serve Ohio and Michigan users.

Prior to this acquisition, TEGNA acquired the broadcasting stations of Midwest Television, which include KFMB-TV, KFMB-D2 (CW), KFMB-AM and KFMB-FM. The deal expanded the company’s U.S. television household reach by more than one million.

We believe the acquisitions are likely to result in cost efficiency, thereby driving profitability.

TEGNA currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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