Media, broadcasting, and digital services company E.W. Scripps (NASDAQ:SSP) announced better-than-expected revenue in Q3 CY2024, with sales up 14.1% year on year to $646.3 million. Its GAAP profit of $0.37 per share was in line with analysts’ consensus estimates.

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Company Overview

Founded as a chain of daily newspapers, E.W. Scripps (NASDAQ:SSP) is a diversified media enterprise operating a range of local television stations, national networks, and digital media platforms.

Broadcasting

Broadcasting companies have been facing secular headwinds in the form of consumers abandoning traditional television and radio in favor of streaming services. As a result, many broadcasting companies have evolved by forming distribution agreements with major streaming platforms so they can get in on part of the action, but will these subscription revenues be as high quality and high margin as their legacy revenues? Only time will tell which of these broadcasters will survive the sea changes of technological advancement and fragmenting consumer attention.

Sales Growth

Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Over the last five years, E.W. Scripps grew its sales at a mediocre 12.8% compounded annual growth rate. This shows it couldn’t expand in any major way, a tough starting point for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. E.W. Scripps’s recent history shows its demand slowed as its revenue was flat over the last two years.

We can better understand the company’s revenue dynamics by analyzing its most important segments, Local Media and Scripps Networks, which are 68.9% and 31.2% of revenue. Over the last two years, E.W. Scripps’s Local Media revenue (advertising and re-transmission fees) averaged 5.3% year-on-year growth. On the other hand, its Scripps Networks revenue (advertising) averaged 7.1% declines.

This quarter, E.W. Scripps reported year-on-year revenue growth of 14.1%, and its $646.3 million of revenue exceeded Wall Street’s estimates by 2.7%.

We also like to judge companies based on their projected revenue growth, but not enough Wall Street analysts cover the company for it to have reliable consensus estimates.

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Cash Is King

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

E.W. Scripps has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.5%, lousy for a consumer discretionary business.

Key Takeaways from E.W. Scripps’s Q3 Results

We enjoyed seeing E.W. Scripps exceed analysts’ EBITDA expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Overall, this quarter had some key positives. The stock traded up 2.5% to $3.62 immediately following the results.

E.W. Scripps had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.