Nexstar (NXST) is one of those companies you’ve never heard of — but probably use on a weekly basis. It’s a television broadcasting and digital media company that acquires and runs TV stations, websites and other digital media properties, asserts Mike Cintolo, editor of Cabot Top Ten Trader.
All in, Nexstar owns, operates or provides sales and services to 174 TV stations in 100 markets across the U.S. and reaches almost 40% of U.S. households.
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It became one of the biggest broadcast groups in the U.S. after acquiring Media General for $4.6 billion in 2017, and with the proposed acquisition of Tribune for $6.4 billion, it’s about to get even bigger.
Revenue (up 14% in 2018 to $2.77 billion) is about evenly split between advertising (local, national and political), which was up 18% in 2018, and retransmission and digital content (community portal websites, mobile apps, etc.), which rose by 14% in 2018.
Investors like the company because it has a resilient business model (even with cord-cutting, pay TV services and TV advertising appear stable) and because free cash flow growth is incredibly attractive (up 46% last year to $684 million or nearly 13% of the firm’s market cap).
Analysts will update their numbers once the deal with Tribune is settled, but as of now, look for revenue to be around flat this year then up 15% in 2020, when EPS should rise 75% to $11. A 1.7% dividend is another plus to this story. Earnings are due May 8.
NXST has taken investors on a bit of a rollercoaster ride over the last three years. The stock has a tendency to go on multi-month rallies, before pulling back by around 20% and consolidate, then go on a new run to fresh highs.
The low point in 2018 was in May when NXST dipped to $59. It moved up through the summer, then traded mostly in the $70 to $85 range through the end of the year.
The breakout came in February when shares leapt above $90 and, impressively, have gone on a persistent run ever since. Dips toward the 25-day line would be attractive.
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