Guggenheim maintains TEGNA stock buy rating with $22 target

On Friday, Guggenheim reiterated its Buy rating on TEGNA Inc. (NYSE:TGNA) with a steady price target of $22.00. According to InvestingPro data, analysts maintain a strong buy consensus with price targets ranging from $19 to $23, suggesting potential upside. The stock currently appears undervalued based on InvestingPro's Fair Value analysis. The firm's analysts adjusted their financial model for the media company to account for challenges in core advertising and pressures on retransmission revenues due to the ongoing decline of the pay-TV landscape. This revision resulted in a decrease in TEGNA's revenue forecast for 2025, now projected at $2.76 billion, down from the previous estimate of $2.85 billion. The firm also lowered its EBITDA expectations for the same period to $610 million from $687 million.

Despite the downward revision in revenue and EBITDA forecasts, Guggenheim's outlook on TEGNA remains positive due to the company's strong financial position. The analysts highlight TEGNA's robust balance sheet, which they believe positions the company well to capitalize on potential deregulation opportunities that may arise. InvestingPro analysis confirms this strength, showing a "GREAT" overall financial health score and liquid assets exceeding short-term obligations, with a healthy current ratio of 2.6x. In the absence of significant transactions, TEGNA is expected to continue prioritizing shareholder returns. The firm anticipates TEGNA will execute $300 million in stock buybacks and pay out $79 million in dividends in 2025.

TEGNA's management has communicated a commitment to returning a significant portion of the company's free cash flow (FCF) to its shareholders. Over the next two years, the company plans to distribute between 40% to 60% of its FCF in the form of dividends and buybacks. Additionally, TEGNA aims to maintain a net leverage ratio of approximately 3.0 times. The company has maintained dividend payments for 54 consecutive years and currently offers a 2.75% yield. With a strong free cash flow yield of 19%, TEGNA demonstrates robust cash generation ability. For deeper insights into TEGNA's financial health and valuation metrics, access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with expert analysis and actionable intelligence.

The Guggenheim analysts' commentary underscores the impact of industry-wide shifts on TEGNA's business model but also notes the company's proactive measures to manage these changes. TEGNA's strategy to balance shareholder returns with maintaining a healthy leverage profile is a key aspect of the company's financial planning as it navigates the evolving media environment.

In other recent news, TEGNA Inc. reported significant financial developments. The company announced a regular quarterly dividend of 12.5 cents per share, demonstrating its ongoing commitment to providing value to its stockholders. This decision aligns with TEGNA's financial strategies and capital allocation plan, which includes dividends, share repurchases, and strategic investments.

In their Third Quarter 2024 Earnings Conference Call, TEGNA reported a 13% year-over-year revenue increase to $807 million, primarily driven by political advertising. The company also managed to reduce expenses by 2% in Q3, returning $91 million to shareholders.

CEO Mike Steib and CFO Julie Heskett outlined a future strategy focusing on digital growth, operational efficiency, and effective capital allocation. They expressed caution about the 2025 outlook due to the expected absence of political advertising revenue and potential FCC (BME:FCC) regulatory changes impacting acquisitions and duopoly rules. These recent developments highlight TEGNA's ongoing efforts to adapt to an evolving media landscape.

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