TEGNA Inc. (NYSE: TGNA) is a company that may seem old-school in the world of media if you just think that cord-cutting is the only future. After all, operating 46 television stations that produce local programming doesn’t seem that grandiose to the youngsters. Still, not everyone feels that way. In fact, TEGNA had a pretty impressive price target raise at the independent research firm Argus.
As a reminder, TEGNA is the former Gannett, minus the newspaper publishing operations. Monday’s research report from Argus reiterated the firm’s Buy rating and raised its price target to $33.00 from $30.00.
Argus expects continued growth in TEGNA’s digital operations in the near term. They even expect that the broadcasting segment will rebound during the 2016 political election season. Argus said that management is focused on controlling costs and returning capital to shareholders.
This report shows that current prices near $28 mean that the shares are attractively valued relative to peers. TEGNA’s broadcasting segment comprises the largest independent group of major network affiliates in the top 25 U.S. markets, while its digital business consists of several growing online companies, including Cars.com and CareerBuilder.
Argus said:
Looking ahead, we expect continued growth in digital operations in the near-term and look for the Broadcasting segment to rebound during the 2016 election season. The shares appear undervalued relative to peers. The company reported third quarter results on November 6. Operating revenue rose 19% to $807 million from $681 million in the prior-year period. The increase was driven by record results in the digital segment, primarily reflecting contributions from Cars.com… Earlier this month, the company acquired three TV stations from Sandler Media LLC. The stations are located in Portland, Oregon; Louisville, Kentucky; and Tucson, Arizona.
As far as TEGNA’s valuation, you have already heard that it is cheap to peers. The shares have traded in a range of $23 to $31 since the spin-off and are currently above the mid-point of the range. On a price-to-sales basis, the stock is trading at a multiple of 0.95, versus an industry average of 1.5. On price to earnings, the projected 2016 multiple of 12.1 is under the industry average of 14.8.
The revised target price of $33.00 assumes multiples that approach industry averages, as earnings growth accelerates into the 2016 presidential election year.
TEGNA shares were last seen down more than 1% at $27.78 Monday. The consensus analyst price target is $31.75.
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