Why Sinclair Broadcast Group (SBGI) Stock Is Climbing On Wednesday

NEW YORK (TheStreet) -- Shares of Sinclair Broadcast Group Inc. (SBGI) are gaining 13.99% to $33.33 in mid-morning trading today, along with other TV broadcasting stocks, after the U.S. Supreme Court ruled against the online video streaming company Aereo, saying it violated copyright laws.

The Supreme Court Justices voted 6-3 against Aero saying online services cannot stream copyrighted TV programs without paying licensing fees, according to the Los Angeles Times.

Additionally, on June 23 Sinclair announced it entered into two agreements to sell the assets of its WHTM-TV to Media General (MEG) and WTAT-TV to Cunningham Communications for a combined total of $97.4 million.

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Separately, TheStreet Ratings team rates SINCLAIR BROADCAST GP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate SINCLAIR BROADCAST GP (SBGI) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, robust revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including relatively poor performance when compared with the S&P 500 during the past year and generally higher debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • In comparison to the other companies in the Media industry and the overall market, SINCLAIR BROADCAST GP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • The revenue growth greatly exceeded the industry average of 14.6%. Since the same quarter one year prior, revenues rose by 46.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • SINCLAIR BROADCAST GP has improved earnings per share by 35.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in 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 ($1.96 versus $0.66).
  • In its most recent trading session, SBGI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • The debt-to-equity ratio is very high at 9.10 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, SBGI has managed to keep a strong quick ratio of 1.52, which demonstrates the ability to cover short-term cash needs.
  • You can view the full analysis from the report here: SBGI Ratings Report
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