Local television broadcasting and media company Gray Television (NYSE:GTN) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 2.7% year on year to $823 million. On the other hand, next quarter's revenue guidance of $837 million was less impressive, coming in 1.9% below analysts' estimates. It made a GAAP profit of $0.79 per share, improving from its loss of $0.48 per share in the same quarter last year.

Is now the time to buy Gray Television? Find out by accessing our full research report, it's free.

Specializing in local media coverage, Gray Television (NYSE:GTN) is a broadcast company supplying digital media to various markets in the United States.

Broadcasting

Broadcasting companies have been facing secular headwinds in the form of consumers abandoning traditional television and radio in favor of streaming services. As a result, many broadcasting companies have evolved by forming distribution agreements with major streaming platforms so they can get in on part of the action, but will these subscription revenues be as high quality and high margin as their legacy revenues? Only time will tell which of these broadcasters will survive the sea changes of technological advancement and fragmenting consumer attention.

Sales Growth

Reviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Gray Television's annualized revenue growth rate of 19.2% over the last five years was solid for a consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Gray Television's recent history shows its momentum has slowed as its annualized revenue growth of 10.7% over the last two years is below its five-year trend.

We can better understand the company's revenue dynamics by analyzing its most important segments, Retransmission and Advertising, which are 46.3% and 45.2% of revenue. Over the last two years, Gray Television's Retransmission revenue (affiliate and licensing fees) averaged 15.3% year-on-year growth while its Advertising revenue (marketing services) averaged 9.5% growth.

This quarter, Gray Television grew its revenue by 2.7% year on year, and its $823 million of revenue was in line with Wall Street's estimates. The company is guiding for revenue to rise 3% year on year to $837 million next quarter, improving from the 6.3% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 16.3% over the next 12 months, an acceleration from this quarter.

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Cash Is King

If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.

Over the last two years, Gray Television has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 9.6%, subpar for a consumer discretionary business.

Gray Television's free cash flow came in at $87 million in Q1, equivalent to a 10.6% margin and up 278% year on year. Over the next year, analysts predict Gray Television's cash profitability will improve. Their consensus estimates imply its LTM free cash flow margin of 6.2% will increase to 12.9%.

Key Takeaways from Gray Television's Q1 Results

We were impressed by how significantly Gray Television blew past analysts' EPS expectations this quarter. On the other hand, its operating margin missed and its revenue guidance for next quarter came in slightly below Wall Street's estimates. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. The stock is up 2.9% after reporting and currently trades at $6.85 per share.

So should you invest in Gray Television right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.