NEW YORK (TheStreet) -- Shares in Sinclair Broadcast Group (SBGI - Get Report) are up 4.9% to $28.73 on Wednesday after the company was upgraded to "outperform" from "market perform" at Wells Fargo (WFC - Get Report).
Wells Fargo updated the broadcasting company's rating due to its comfort with the regulatory environment and the belief that stocks in TV broadcasting have limited downside risks.
TheStreet Ratings team rates SINCLAIR BROADCAST GP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
Must Read: Why Alcoa (AA) Is Climbing on Wednesday
"We rate SINCLAIR BROADCAST GP (SBGI) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, robust revenue growth, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to other companies in the Media industry and the overall market, SINCLAIR BROADCAST GP's return on equity exceeds that of both the industry average and the S&P 500.
- The revenue growth came in higher than the industry average of 4.0%. Since the same quarter one year prior, revenues rose by 29.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, SBGI's share price has jumped by 34.05%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- SINCLAIR BROADCAST GP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, SINCLAIR BROADCAST GP reported lower earnings of $0.66 versus $1.77 in the prior year. This year, the market expects an improvement in earnings ($2.17 versus $0.66).
- The gross profit margin for SINCLAIR BROADCAST GP is rather high; currently it is at 60.70%. Regardless of SBGI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SBGI's net profit margin of 0.53% is significantly lower than the industry average.
- You can view the full analysis from the report here: SBGI Ratings Report