Benchmark maintains Buy rating on TEGNA stock with $21 target

On Friday, Benchmark analysts maintained their Buy rating and $21.00 price target for TEGNA Inc. (NYSE:TGNA), following an unexpected stock performance. Despite a quarter that was only in line with expectations and a first-quarter guide that missed revenue consensus, TEGNA shares closed up 8% on Thursday, becoming one of the top performers in Benchmark’s coverage universe. The stock’s momentum is evident in its impressive 31% gain over the past six months, and according to InvestingPro analysis, TEGNA is currently trading near its 52-week high of $19.62, while still appearing slightly undervalued based on Fair Value estimates.

The analysts were puzzled by the stock’s rise, given the company’s softer core and Premion outlook, along with an EBITDA guide that was approximately $10 million below consensus. The year’s outlook doesn’t seem to be the driving factor either, as estimates are generally being lowered due to TEGNA facing the toughest core advertising comparison in the latter half of the year, especially with the third-quarter Olympics. InvestingPro data shows TEGNA maintains strong fundamentals with a "GREAT" overall financial health score of 3.14 and an attractive P/E ratio of 5.17, suggesting the market may be undervaluing its current financial strength.

Benchmark attributed the stock’s performance to a mix of factors. The appointment of new CEO Mike Steib, who is expected to scrutinize expenses closely, could lead to further cost savings and potentially drive long-term revenue growth. Additionally, there is optimism within the industry for potential regulatory relief, based on discussions with lawmakers about modernizing regulations. This optimism, combined with the new CEO’s cost management initiatives, may have fueled investor hope for a future acquisition of TEGNA.

The analysts suggest that as long as investors remain hopeful about a takeover or asset monetization, it would likely require a significant downturn to diminish their enthusiasm. They also noted that the stock price should have a solid base in the $16-17 range, with the potential for further upside if synergistic transactions occur alongside regulatory relief. However, it was mentioned that the previous transaction under consideration would not have required changes to the regulatory environment. Adding to investor confidence, InvestingPro reveals TEGNA’s impressive 55-year track record of maintaining dividend payments, currently offering a 2.79% yield. For deeper insights into TEGNA’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

In other recent news, Tegna Inc . reported its fourth-quarter earnings for 2024, revealing a slight miss in earnings per share (EPS) and revenue compared to forecasts. The company posted an EPS of $1.21, falling short of the anticipated $1.26, and revenue of $871 million, below the forecasted $884.71 million. Despite these misses, Tegna’s revenue marked a significant 20% year-over-year increase, and the full-year revenue reached $3.1 billion, up 7% from the previous year. Tegna is actively pursuing digital transformation and cost-saving initiatives, which are expected to enhance efficiency and profitability. The company has reaffirmed its free cash flow guidance for 2024-2025, projecting between $900 million and $1.1 billion. Tegna anticipates a 4-7% year-over-year decline in total revenue for the first quarter of 2025. Additionally, the company is focusing on renewing 45% of its traditional subscriber base in 2025. Analyst discussions during the earnings call highlighted Tegna’s strategic focus on mergers and acquisitions, particularly in light of potential regulatory changes.

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