On Friday, Deutsche Bank updated its financial model for Nexstar Broadcasting Group (NASDAQ:NXST), which resulted in a slight decrease in the company's price target. The target was adjusted from $210.00 to $207.00, while the firm maintained a Buy rating on the stock.
The adjustment reflects changes in Nexstar's first-quarter performance and management's recent statements about the company's operations.
Nexstar's first-quarter results were in line with revenue expectations and surpassed adjusted EBITDA forecasts by 3.3%. Deutsche Bank's revisions to its model take into account Nexstar's updated calculation of adjusted EBITDA and adjusted free cash flow (FCF).
The new EBITDA calculation includes certain add-backs such as stock-based compensation (SBC) and one-time restructuring expenses, while excluding non-cash pension credits. Adjusted FCF now excludes non-cash items and includes cash contributions from non-controlling interest (NCI) partners related to The CW network.
Management indicated that these changes would have a positive effect on reported EBITDA, increasing it by $52 million for the year. Consequently, the guidance for 2024 EBITDA is now expected to be between $2.14 billion and $2.25 billion, which is equivalent to the previous quarter's forecast. Deutsche Bank is now projecting a $2.19 billion EBITDA for 2024.
However, due to a slower than anticipated profit increase for The CW, largely due to investments in sports rights, Deutsche Bank has reduced its adjusted EBITDA forecast for 2024 by 2.0% on a comparable basis. This investment is expected to yield long-term benefits. The firm's multi-year EBITDA forecast is also revised downward by 0.2-1.2% annually, again on a comparable basis due to the definition change.
The revised 12-month price target of $207 represents a 19% upside potential for Nexstar shares and implies a valuation of 6.8 times enterprise value to EBITDA, based on Deutsche Bank's blended estimates for 2024-2025.
InvestingPro Insights
Investors following Nexstar Broadcasting Group (NASDAQ:NXST) should note that the company has a strong track record of returning value to shareholders, as highlighted by InvestingPro Tips. Management's aggressive share buyback strategy and a consistent history of dividend payments, which have been raised for 11 consecutive years, speak to a commitment to shareholder yield. Moreover, the company has maintained dividend payments for 12 consecutive years, demonstrating a reliable income stream for investors.
From a financial standpoint, Nexstar's market capitalization stands at $5.6 billion, with a P/E ratio that has adjusted to 13.44 as of the last twelve months leading up to Q1 2024. The company's revenue for the same period was reported at $4.96 billion, despite a slight decline in revenue growth by -5.67%. Additionally, the gross profit margin remains strong at 57.0%, indicating efficient operations and cost control. For those interested in dividend income, Nexstar's dividend yield as of the latest available data was a notable 3.96%, coupled with a significant dividend growth of 25.19% in the last twelve months.
For readers looking to delve deeper into Nexstar's financials and future prospects, InvestingPro offers detailed analysis and additional tips. There are a total of 7 InvestingPro Tips available, which can be accessed by visiting: https://www.investing.com/pro/NXST. To enhance your investment research, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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