If the revenue warnings issued by three station groups last week are any indication, the third quarter is proving to be more difficult than many broadcasters had expected.
Earlier this year many station group executives predicted big things for the third quarter, buoyed by robust political ad spending amid a tight presidential race and indications that the economy was staging a comeback.
However, thanks to weakness in the automotive sector, coupled with political advertising that never materialized, cold water has been thrown on many station groups’ high expectations, which could mean even more bad news for station group stocks already languishing as investors anticipate a rough 2005, thanks to the absence of any substantial political campaign spending.
The first signs of the dimming third-quarter prospects came last week as LIN TV Corp., Sinclair Broadcast Group and Nexstar Broadcasting all warned that revenue growth for the third quarter would be lower than expected.
LIN last Tuesday said it expected third-quarter revenue percentage growth in the high single digits, compared with a July forecast that revenue would rise by a percentage in the mid-teens. The company reports its third-quarter results Oct. 28. Another factor weighing on revenue growth: the string of hurricanes that hit Puerto Rico, where LIN owns two TV stations.
The hurricanes were a factor for Sinclair as well, which said last week it is now expecting broadcast revenue growth at its 62 stations to be about 1.5 percent higher than the 2003 third-quarter figure of $161.3 million, versus an earlier third-quarter growth forecast of 4 percent to 5 percent. The company’s eight stations in the Southeast suffered $500,000 in ad cancellations sparked by the harsh weather there.
Meanwhile, Nexstar was particularly hard hit by a pullback in political spending in Missouri, Illinois and Arkansas-states the national political campaigns view as being less competitive than before. The company projected it would miss out on $3 million to $4 million in political ad spending, bringing the third-quarter total to an estimated $6 million. Overall revenue is now expected to rise 10 percent to 11 percent, compared with earlier estimates of growth between 18 percent and 20 percent.