Local broadcasting and digital media company Nexstar (NASDAQ:NXST) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 2.1% year on year to $1.28 billion. It made a GAAP profit of $5.16 per share, improving from its profit of $2.96 per share in the same quarter last year.

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IRVING, Texas--(BUSINESS WIRE)--Nexstar Media Group, Inc. (NASDAQ: NXST) (“Nexstar” or the “Company”) today reported financial results for the first quarter ended March 31, 2024.

Founded in 1996, Nexstar (NASDAQ:NXST) is an American media company operating numerous local television stations and digital media outlets across the country.

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

Examining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Nexstar Media's annualized revenue growth rate of 12.3% over the last five years was mediocre for a consumer discretionary business. Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Nexstar Media's recent history shows the business has slowed as its annualized revenue growth of 2.2% 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, Distribution and Core Advertising, which are 59.3% and 39.9% of revenue. Over the last two years, Nexstar Media's Distribution revenue (licensing and affiliate fees) averaged 4.6% year-on-year growth while its Core Advertising revenue (TV and radio ads) was flat.

This quarter, Nexstar Media grew its revenue by 2.1% year on year, and its $1.28 billion of revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 12.4% 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, Nexstar Media has shown strong cash profitability, giving it an edge over its competitors and the option to reinvest or return capital to investors while keeping cash on hand for emergencies. The company's free cash flow margin has averaged 20.6%, quite impressive for a consumer discretionary business.

Nexstar Media's free cash flow came in at $403 million in Q1, equivalent to a 31.4% margin and up 10.7% year on year. Over the next year, analysts predict Nexstar Media's cash profitability will improve. Their consensus estimates imply its LTM free cash flow margin of 16.6% will increase to 22.8%.

Key Takeaways from Nexstar Media's Q1 Results

We were impressed by how significantly Nexstar Media blew past analysts' adjusted EBITDA and EPS expectations this quarter. We were also glad its Core Advertising revenue outperformed Wall Street's estimates. On the other hand, its revenue unfortunately missed. Overall, we think this was a solid quarter. The stock is flat after reporting and currently trades at $168.5 per share.

Nexstar Media may have had a good quarter, but does that mean you should invest 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.